In July, the sun blazed, and the summer in the crypto world welcomed the wave of tokenization in the US stock market.

Robinhood announced in a high-profile manner that European users can trade U.S. stocks on the Arbitrum chain with 24/7 availability; xStocks collaborates with Kraken and Solana to launch on-chain tokens for 60 popular U.S. stocks, and Coinbase has also applied to the SEC to launch tokenized securities…

For a time, the tokenization of US stocks has become one of the few narratives that is correct in the dull crypto space, and this trend has dominated everyone’s timelines.

But this is not the first time for tokenization of US stocks.

The dead memories begin to attack me again, making me reminisce about that summer five years ago.

In August 2020, the summer of DeFi swept through the crypto space like a raging fire, the liquidity mining of Uniswap ignited a frenzy, Terra’s Luna chain and UST soared, and on-chain finance has actually made many innovations, including the tokenization of US stocks.

At that time, there was a protocol called Mirror on Luna, and I minted mAAPL (the token corresponding to Apple stock) with a few dollars of UST on Terra Station, without KYC, without opening an account, touching the pulse of Apple’s stock price for the first time while bypassing the brokerage.

But there is a lyric that perfectly describes the feelings of old investors after experiencing all of this:

“You left noise in my life, but after you left, it’s terrifyingly quiet.”

Luna ultimately collapsed, and Mirror was also crushed by the SEC’s lawsuit, shattering the dreams of 2020 into pieces. Aside from the trading hash, there seems to be nothing that can prove that the tokenization of US stocks existed as early as the summer five years ago.

Now, xStocks and Robinhood are making a comeback, reigniting hope for on-chain U.S. stocks. Will this time be successful? How is it different compared to five years ago?

That summer, Mirror’s free utopia

If you no longer remember the Mirror Protocol, or if you weren’t involved at the time, let me help you rekindle that long-lost memory.

The core idea of the Mirror Protocol is to use on-chain synthetic assets to track the stock prices of US stocks in the real world. This approach has given rise to a type of asset called mAssets.

The so-called “synthetic assets” mAssets are tokens that simulate stock prices through smart contracts and oracles. Token holders do not own the actual stocks, but rather act as “on-chain shadows” to track price fluctuations.

For example, mAAPL (Apple), mTSLA (Tesla), and mSPY (S&P 500 ETF) rely on Band Protocol’s decentralized oracle to obtain real-time US stock data.

Although this is different from directly buying US stocks, it is convenient.

Minting mAssets is very simple. You can over-collateralize 150%-200% with the stablecoin UST on the Terra chain at that time, and you can obtain the corresponding tokenized stocks through the Terra Station without KYC. The transaction fee is only about 0.1 USD.

These tokens can not only be traded 24/7 on Terraswap (Terra’s DEX at the time), just as flexibly as token pairs on Uniswap; they can also be used as collateral in another lending protocol within their ecosystem, Anchor Protocol, for borrowing or earning interest.

Not only can one enjoy the growth returns of US-listed companies, but also leverage the flexibility of on-chain finance. Five years ago, DeFi seemed to have figured out how to tokenize US stocks.

But the good times didn’t last long, and that summer dream shattered unexpectedly.

In May 2022, a famous black swan event struck the crypto world. Terra’s algorithmic stablecoin UST depegged, Luna plummeted from $80 to just a few cents, mAssets went to zero overnight, and Mirror nearly came to a halt.

To make matters worse, the U.S. SEC has taken action, accusing mAssets of being unregistered securities, and Terraform Labs and its founder Do Kwon are mired in legal troubles.

From “Hold on tight, folks” to “Sorry, we failed,” the collapse of the Terra system has also made the tokenization of US stocks vanish without a trace on the chain. While reflecting and reminiscing, you can also see its fatal weakness in reverse:

Synthetic assets heavily rely on oracles and the stability of UST, with no actual stock support; the collapse of the underlying will turn upper-layer assets into illusions. In addition, while anonymous transactions attract users, they inevitably touch regulatory red lines; at that time, regulations and policies were far from as open and lenient as they are today.

The fragility of synthetic assets, the risks of stablecoins, and the lack of regulation have come at a painful cost for this experiment.

What’s different this time?

Just because it wasn’t successful then doesn’t mean it won’t be successful now.

The summer of 2020 has passed, and this time Kraken, Robinhood, and Coinbase are trying to rewrite the story with more mature technology and compliance posture.

As an old player who witnessed the summer of DeFi, I can’t help but compare: what is different this time compared to Mirror five years ago?

We may be able to look at it from three parts: products, participants, and market environment.

• Product: From On-chain Shadow to Real Anchor

As mentioned earlier, tokens like mAAPL and mTSLA are just “on-chain shadows” simulated by smart contracts, not holding actual stocks, but only simulating price fluctuations.

And now xStocks has taken a different path. xStocks is held by regulated brokers, ensuring the redeemable cash value after purchasing stocks.

The process of tokenization of US stocks is operated by Backed Assets, a token issuer registered in Switzerland, responsible for purchasing and tokenizing assets.

It buys stocks, such as Apple or Tesla, through the IBKR Prime channel of Interactive Brokers (a professional brokerage service connecting to the US stock market), then transfers the assets to Clearstream (the custody institution of Deutsche Börse) for isolated storage, ensuring that each Token corresponds 1:1 to the actual holdings and is subject to legal audit.

In short, every on-chain purchase you make is anchored by a real stock purchase behind it.

(Image source: X user@_FORAB)

In addition, xStocks allows token holders to redeem actual stocks through Backed Assets, a feature that enables it to break away from the purely on-chain speculative framework of Mirror, connecting on-chain and off-chain.

• Participants: From DeFi native to TradFi integration

The stage of Mirror belongs to the native DeFi players. Retail investors and developers from the Terra community are the main force, and the heated discussions on Discord and Twitter have driven the popularity of mAssets. The success of Mirror is inseparable from the Luna and UST boom within the Terra ecosystem, and the experimental spirit of the community has made it shine like a comet.

This also makes one sigh that the adult era has changed.

The recent tokenization of US stocks is primarily led by traditional financial giants and compliant enterprises within the industry.

For example, xStocks is a compliant platform provided by Kraken, Robinhood brings traditional brokerage experience on-chain, and BlackRock’s tokenization pilot further signifies the entry of institutions.

The DeFi ecosystem of Solana (such as Raydium and Jupiter) indeed invigorates xStocks, allowing retail investors to use tokens for liquidity mining or lending, thus retaining some DeFi genes.

But compared to the community-driven approach of Mirror, xStocks feels more like a grand production directed by exchanges and TradFi giants: larger in scale, but less wild.

• Market and Regulatory Environment: From Gray Area to Compliance is King

The Mirror, born in the regulatory gray area of 2020, saw little interest in compliance during the DeFi summer, where anonymous trading was the community’s default rule. In 2022, the SEC classified mAssets as unregistered securities, and Terraform Labs found itself deep in litigation, with anonymity becoming a fatal flaw.

At that time, the market was still small, and DeFi was more like a testing ground for a group of geeks.

The market and regulation in 2025 will be drastically different. Projects like xStocks prioritize compliance, enforce KYC/AML, and adhere to EU MiCA regulations and US securities laws.

After taking office in January 2025, the new SEC Chairman Paul Atkins referred to tokenization as the “digital revolution of finance,” and the loose policies are also loosening the restrictions on innovation. In June 2025, Dinari obtained the first tokenized stock brokerage license in the United States, further paving the way for Kraken and Coinbase.

The embrace of mainstream finance and changes in the market environment have allowed xStocks and Robinhood to navigate the legal pitfalls of Mirror in a compliant manner, but it also seems to have taken away the grassroots flavor of on-chain US stocks from years past.

The Echo of Summer

The crypto space has changed over the years, yet it seems like it hasn’t changed.

Five years ago, the tokenization of US stocks in DeFi was like an unrefined carnival, full of passion but lacking stability. Today, five years later, crypto has donned a compliant exterior, walking a steadier path, but it has also lost some of its spontaneity and roughness.

Similar products, different scenarios.

As more people see BTC as digital gold, as institutions are gearing up, and as crypto gradually becomes a tool for boosting the stock prices of traditional capital markets, two groups of people, both inside and outside the industry, may have inadvertently completed the transformation of their doubts:

People who used to trade U.S. stocks did not understand why the cryptocurrency market was so booming; now, those trading coins are beginning to wonder why U.S. stocks with a crypto label keep rising.

Only that summer, the FOMO frenzy that everyone was eager to join, that ubiquitous spirit of the grassroots and geeks, may have long since vanished with the wind.

Statement:

1. This article is reprinted from [TechFlow] The copyright belongs to the original author [TechFlow] If you have any objections to the reprint, please contact Gate Learn TeamThe team will process it as soon as possible according to the relevant procedures.
2. Disclaimer: The views and opinions expressed in this article only represent the author’s personal opinions and do not constitute any investment advice.
3. Other language versions of the article are translated by the Gate Learn team, unless otherwise stated.GateUnder no circumstances shall the translated articles be copied, disseminated, or plagiarized.