Major crypto exchanges Kraken and Bybit are now offering tokenized stocks and ETFs through Swiss-based Backed’s xStocks platform, targeting investors outside the United States who want easier access to American equities.
The service offers high profile US stocks including major tech companies, Nike, Walmart, and Exxon Mobil in tokenized form. For non-US investors, this promises easier access to fractional US stock ownership, while crypto natives can hold these Solana-based assets directly in their wallets alongside other digital assets.
“With xStocks, we’re not launching a novelty. We’re unlocking something foundational,” said Arjun Sethi, Kraken’s co-CEO. “For the first time, people all over the world can own and use a share of a tokenized stock like they would use money. You can move it, hold it, spend it, or borrow against it. All from your wallet, with no intermediaries, no borders, and no delays.”
Kraken doesn’t charge trading fees for users paying in USD or the USDG stablecoin, though spreads apply. However, token holders don’t directly own the underlying stocks. Dividends are converted into additional token holdings rather than cash payments, and the tokens are backed one-to-one by actual shares held by Backed.
Additional risks and verification challenges
Despite claims of eliminating intermediaries, tokenized stocks actually introduce different ones, along with additional risks. Kraken’s terms highlight exposure to the exchange’s own operational and technology risks, Backed’s financial stability, potential counterparty failures, legal complexity, and liquidity constraints. The market for a tokenized version like TSLAx will inevitably be much smaller than the market for the actual Tesla stock, potentially making it harder to sell when desired.
Backed provides attestations through Chainlink’s Proof of Reserves system linked to custodians via APIs. Verification is provided by the Network Firm, a crypto-focused accounting service. However, effective verification requires independence. When attestation firms specialize heavily within an industry, they may face pressure to maintain client relationships rather than ask tough questions, potentially compromising their oversight role.
This concern isn’t unique to crypto – it applies when auditors become too embedded within the industries they’re meant to independently verify. The gold standard would include periodic verification by auditors from outside the crypto ecosystem who haven’t been involved in the technical integration process. After all, the backing assets are very conventional.
However, implementing a proof of reserves system represents major progress toward transparency as the sector matures.
The latest iteration of the tokenized stock market is significantly higher quality than early offerings in 2018, which were often questionable. But investors will need to weigh the convenience benefits against these additional risk layers.
