The Digital Asset Primer: Why Equity Markets Are Being Tokenized

It’s been over 15 years since the first bitcoin was minted. Now, cryptocurrency is making good on some of its promises to reshape centuries-old financial paradigms.

The sector’s latest target? Equity markets.

Crypto exchange Kraken is planning to offer tokenized versions of more than 50 stocks, including names like Apple, Tesla and Nvidia, along with exchange-traded funds (ETFs), showing that blockchain is increasingly maturing beyond its earlier history as a fringe innovation.

Branded as xStocks, Kraken’s tokenized equities are digital representations of actual shares, made tradable on the Solana blockchain. The xStocks will only be available to customers in Europe, Latin America, Africa and Asia.

This isn’t the first attempt at bridging crypto with traditional equities. Binance, for instance, flirted with tokenized stocks in 2021 before regulatory scrutiny forced a retreat. However, Kraken’s approach is more calculated and compliance-conscious, built on partnerships and a clear value proposition.

The exchange aims to prove that blockchain technology can provide a key substrate upon which next-generation financial services can be built.

Each xStock is backed 1-to-1 by actual shares, held through Kraken’s Swiss partner, Backed Finance. Investors can redeem the tokens for the cash equivalent of the underlying assets, reinforcing price parity and transparency, two pillars often absent in early blockchain experiments.

See also: The CFO and Treasurer’s Guide to Digital Assets

The What and Why of Tokenized Equities on the Blockchain

Kraken’s xStocks aren’t targeting American day traders or Wall Street veterans. Instead, they’re aimed at retail investors in emerging and underserved markets, an often-overlooked demographic.

In countries with capital controls or limited brokerage services, investing in U.S. stocks typically involves high fees, delayed settlement times and bureaucratic entanglements. Kraken hopes to eliminate these traditional barriers by using the decentralized nature of blockchain to provide instant, 24/7 trading access — no matter the time zone or local economic constraints.

The core innovation of tokenized equities lies in the use of blockchain infrastructure to issue and manage these assets. By using smart contracts and decentralized ledgers, tokenized equities offer advantages such as fractional ownership, 24/7 trading and greater global accessibility. For investors in countries with limited access to U.S. financial markets, tokenized stocks may present a compelling alternative.

Kraken isn’t alone in its interest in tokenizing equities and other real-world assets onto the blockchain.

“Banks are in the state where they are thinking about blockchains as public infrastructure that they need to rely on,” Chainalysis co-founder and CEO Jonathan Levin told PYMNTS. “Back in 2014 … cryptocurrency only meant blockchains that had native cryptocurrency tokens in April.

“Today, people are putting all types of financial instruments on the blockchain,” he added.

BlackRock CEO Larry Fink said all assets should be tokenized on a blockchain and tradable online, writing in his 2025 annual shareholder letter: “Every stock, every bond, every fund — every asset — can be tokenized.”

In March, BlackRock launched its first tokenized fund on the Ethereum blockchain, backed by short-term U.S. Treasurys.

Meanwhile, R3 and Solana Foundation announced Thursday (May 22) that they have partnered to bring regulated real-world assets onto a public blockchain, while Visa, Mastercard, J.P. Morgan and other financial players are exploring or piloting real-world tokenized payment and financial systems.

Read also: Crypto Firms Grapple With Bank-Like Risks, Without the Regulation

Bridging Two Financial Worlds

However, the rise of tokenized equities is not without challenges. Chief among them are regulatory uncertainty and the risk inherent to crypto players moving into mainstream financial services without the same level of oversight as traditional financial institutions.

Custody solutions also play a critical role. For tokenized equities to be credible, there must be transparent and secure custody of the underlying assets. Some platforms partner with licensed custodians to hold actual shares, while others use synthetic representations, raising questions about counterparty risk and asset backing.

From a technological standpoint, tokenized equities rely on a mix of public and permissioned blockchains. Ethereum remains a popular choice due to its robust smart contract capabilities and liquidity in decentralized finance (DeFi) ecosystems. However, scalability and gas fees have driven some platforms to alternative chains like Solana, Avalanche and Polygon.

The growing adoption of tokenized equities also represents a potential disruption to traditional financial intermediaries. Brokers, clearinghouses and exchanges may find themselves disintermediated as blockchain-based systems streamline settlement and custody functions. Settlement times can shrink from T+2 to near-instantaneous, reducing counterparty risk and operational costs.

This disintermediation, however, also raises concerns about market integrity and systemic risk. Without centralized oversight, questions about manipulation, insider trading and investor recourse become more pressing. Traditional finance’s emphasis on compliance and risk management remains a counterbalance.

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