US Stock Tokenization: Emerging Trend or Old Wine in New Bottles?

Recently, the tokenization of US stocks has attracted widespread attention from both the crypto community and traditional finance. Multiple platforms have successively launched US stock tokenization products, sparking heated discussions. Is this a new narrative or just old wine in new bottles? We invited three guests to explore this phenomenon from different perspectives, covering aspects such as technology, compliance, investment opportunities, and risks.

US Stock Tokenization: A New Narrative or Old Wine in a New Bottle?

The tokenization of US stocks is essentially a branch of RWA( real world assets), similar to the continuation of STO( security token offerings). STOs were explored from 2017 to 2018, during which they were in the experimental stage. The RWA narrative began to rise last year, mainly due to gradual regulatory easing and traditional companies hoping to participate in the capital appreciation of the coin circle through on-chain involvement.

Compared to traditional US stocks, tokenized stocks support round-the-clock trading, have a lower entry threshold, and greater liquidity. It lowers the trading barrier, but due to the lack of a complete arbitrage mechanism, on-chain prices may become disconnected from off-chain stock prices. Investors need to be cautious of insufficient liquidity and slippage risks.

From the perspective of the coin circle logic, the market has shifted from the competition for traffic to the development of mature products, moving from STO to IDO and then to RWA. The tokenization of the US stock market has both historical roots and is revitalized by regulatory and technological advancements, possessing both short-term sentiment and long-term potential.

The Difference Between Tokenized Stocks and Traditional Stocks

Tokenization of stocks has three main differences compared to traditional stocks:

1. No shareholder identity: Tokenized stocks are held by custodians who hold the actual stocks, and users only hold on-chain certificates without shareholder rights.

2. Price mapping attributes: similar to derivatives, only tracking price, without voting rights or governance rights.

3. High liquidity and low barriers to entry: Supports round-the-clock trading, more flexible than traditional stocks, but excessive liquidity may lead to manipulation of retail investors.

In terms of compliance, issuers need to obtain traditional financial licenses to ensure asset custody transparency and thorough third-party audits. However, outside of the United States, there is regulatory uncertainty.

Risks and Opportunities of Tokenization of Unlisted Stocks

There are three major risks associated with the tokenization of unlisted stocks:

1. Legal Compliance and Governance Conflicts: Related companies may not recognize tokenized stocks, leading to unclear legal status.

2. Information asymmetry: The token may be backed by fund LP shares, and the specific information is opaque.

3. Lack of Pricing Transparency: Insufficient liquidity and imperfect pricing mechanisms make it difficult to protect investors' rights.

If the company cooperates, tokenization can provide startups with Pre-IPO pricing and cash flow recovery opportunities, similar to the market pricing of venture capital, reducing the risk of insufficient funding for research and development. This is a significant opportunity for early-stage projects.

Considerations for Choosing Issuance Chains

The choice of issuing chain involves both technical and commercial considerations. Solana is the preferred choice due to its large user base, fast transaction speed, and mature DeFi ecosystem. Arbitrum may be related to Robinhood's long-term planning, with low gas fees and strong contract customization. The choice is related to the company's governance style and investment direction.

The Long-Term Value of Tokenization of US Stocks

The tokenization of US stocks has long-term value, similar to the transformation of stocks from offline to the internet. The decentralization and transparency of Web3 reduce trust costs, supporting all-day trading and rapid pricing. However, there is currently a lot of speculation, and one must be wary of the risks of manipulation; it is still in the experimental stage.

Perpetual contracts have a higher market acceptance and greater potential because they do not require physical asset collateral. The long-term development of blockchain is promising, but short-term observation is necessary.

Other Tokenization Directions Worth Noting

Apart from US stocks, copyright assets have the greatest tokenization potential, such as music, film, books, and website advertising revenue sharing. Compared to traditional financing, it is transparent and efficient, making it suitable for content creators.

RWA excels over ABS in terms of transparency and automation, but human intervention is a trust pain point. Copyright and real estate tokenization require strong regulation and legal constraints; otherwise, it is difficult to ensure long-term dividends.

Overall, the tokenization of US stocks, as a branch of RWA, connects Web2 and Web3, reducing transaction thresholds and costs, and supporting all-day trading and rapid pricing. The advantages lie in high transparency, regulatory progress, and mature technology, but it faces challenges such as insufficient liquidity, price deviation, lack of redemption mechanisms, and regulatory uncertainties. In the long run, RWA is expected to reshape the financial and content industries, but it requires the joint maturation of technology, regulation, and the market.