xStocks: Equity Markets on Crypto Rails - What You Need to Know
Blockchain-powered Tokenized Stocks, Robinhood Entrance, & More
Traditionally, equities have been bound by restrictive hours, jurisdiction restrictions, and systems that struggle to keep pace with 24/7 digital capital. Tokenized equities are being positioned as the next structural expansion of crypto infrastructure.
Platforms like Robinhood and Kraken are aiming to introduce issuing tokenized versions of Apple, Tesla, and hundreds of U.S. stocks directly on chains like Arbitrum and Solana. With this, investors are now able to trade stocks 24/5 and soon 24/7 onchain with stablecoin settlements.
In today’s edition, we’ll explore what tokenized stocks are, the opportunities in store, Robinhood’s entrance, and more.
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Introduction to xStocks
xStocks are tokenized representations of traditional equities issued by Backed Finance, a Swiss-regulated firm that custodies actual shares and mints 1:1 on-chain tokens. Each xStock, such as NFDXx, METAx or TSLAx, is backed by an actual share held under Swiss custody with a contractual redemption path.
These tokens exist primarily on Solana (as SPL tokens), where they can be traded 24/5 regardless of market hours, T+2 settlement or DTCC restrictions in legacy stock markets.
Kraken and Bybit are currently the highest-profile platforms to integrate xStocks, allowing non-US clients to trade US stocks alongside crypto. However, they are also supported on DeFi avenues like Kamino, Raydium and Jupiter. The true power of xStocks lies in their composability with such DeFi protocols, allowing users to use xStocks as lending collateral or earn trading fees on xStock/USDC pairs.
BackedFi Backend
Backed Finance is the core component in the backend enabling all this. They handle the hardest parts: buying the actual shares, managing dividends and splits, and issuing smart contract tokens on Solana or Ethereum.
A full breakdown of supported xStocks can be found here, each with its own factsheet. The factsheet details information such as the issuance/redemption fee amounts (typically up to 0.50%), the issuance volumes of each stock, the broker, custodian and security agent, etc.
BackedFi essentially takes on the compliance risks as the primary issuer of these assets for platforms supporting xStocks trading. The entire mechanism that keeps xStocks close to actual underlying stock relies on BackedFi’s execution and legal ability to redeem xStocks for the underlying shares.
Robinhood’s Tokenized Stocks
Robinhood has launched a similar effort in Europe, issuing tokenized US stocks (called stock crypto) deployed on Arbitrum and perpetual futures. These assets are not direct shares on a traditional clearing system but rather synthetic representations that Robinhood maintains within its regulatory boundaries from its Lithuanian brokerage and crypto asset services provider licenses. The appeal for these assets is similar, offering retail users fractional ownership, stablecoin settlement, and extended trading hours.
Robinhood presented their keynote address (To Catch A Token) in Cannes detailing their rollout strategy for stock crypto and various unique product offerings which can be summarized into:
Robinhood Chain: They unveiled plans for their own chain built on top of Arbitrum, explicitly pitched as “optimized for real-world assets.” The goal is to eventually enable self-custody of stock tokens, collateralized lending, and cross-asset DeFi use.
Private Company Stock: Robinhood plans to offer private company “equities”, giving an airdrop of OpenAI and SpaceX stock tokens to EU users, seeding speculative exposure to private markets typically gated to insiders. These “equities” however are not directly endorsed nor are they actual shares, rather they likely work through an SPV that controls a share of OpenAI and the tokens are then likely a peg to the ownership value. These synthetic equities serve as a speculative outlet for retail users to price hype on private companies that otherwise have no liquid market, essentially like pre-market tokens.
End Product
At its core, xStocks and Robinhood’s stock tokens convert equities into 24/5 or even 24/7 speculative tokenized assets settled in stablecoins onchain, beyond traditional outside RTH markets. Through Backed Finance, xStocks supported on exchanges like Kraken and Bybit are tied to a an underlying stock 1:1 held by a Swiss-licensed custodian on behalf of BackedFi.
Robinhood’s approach also offers unique asset class exposure through SPVs, reaching into private markets and letting retail investors gain synthetic exposure to pre-IPO companies like OpenAI and SpaceX.
On top of passively holding xStocks, they can also be used for DeFi purposes like lending and LPing against stablecoins. This means xStocks can generate yield or unlock borrowing capabilities, adding a layer of capital efficiency on top of simple capital gains exposure.
xStocks (or tokenized stocks in general) effectively expands both where equity capital can flow and how productively it can be deployed.
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