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What Is Stock Tokenization — and Could Tokenized Equities Replace Traditional Stocks?

TradingKey
AuthorBlock Tao
Jul 11, 2025 7:41 AM

Introduction

TradingKey – On July 2, 2025, U.S. fintech firm Robinhood (HOOD) announced the launch of tokenized U.S. stock trading for European users, sending its share price to a record high. The move has electrified both equity and crypto markets, signaling a new phase in the evolution of stock tokenization.

This article explores the concept, benefits, challenges, leading platforms, and latest developments in tokenized equities.

What Is Stock Tokenization?

Stock tokenization refers to the process of representing traditional equities as blockchain-based digital tokens. Each token corresponds to a specific number of shares — e.g., one token may represent 1 share of NVIDIA (NVDA) or 100 shares, depending on the issuer’s rules.

Unlike synthetic assets in DeFi, tokenized stocks confer actual ownership rights, including dividends and voting power. For example:

  • If Investor A buys a tokenized NVIDIA share, they become a shareholder.
  • If Investor B buys a synthetic NVIDIA asset, they gain price exposure but no ownership rights.

Why Tokenize Stocks?

While investors can already trade stocks via traditional exchanges, tokenization offers transformational advantages:

Traditional Stocks

Tokenized Stocks

Key Differences

Paper or electronic certificates

Blockchain-based digital tokens

Programmable assets with smart contract automation

Limited trading hours (e.g., NYSE 9:30–16:00)

24/7 global trading

Removes time barriers for global investors

T+2 or T+1 settlement

Instant (T+0) settlement

Improves capital efficiency

0.1–0.5% commission + FX fees

~0.05–0.1% gas fees

Cuts costs by ~70%

Manual dividend processing

Automated wallet payouts

Faster and error-free

Email or broker voting

On-chain voting

Immutable governance records

Complex collateralization

DeFi-based lending

Unlocks new financial use cases

Periodic ownership disclosures

Real-time transparency

Enhances regulatory compliance

Will Tokenized Stocks Replace Traditional Equities?

While tokenized stocks offer compelling benefits, technical risks and regulatory hurdles make full replacement unlikely. Instead, a hybrid “on-chain + off-chain” financial ecosystem is emerging.

Challenges include:

  • Smart contract vulnerabilities
  • Private key loss
  • Cyberattacks
  • Regulatory uncertainty, especially in jurisdictions that ban or restrict crypto

Latest Developments in Tokenized Equities

  • On July 9, the U.S. SEC clarified that tokenized securities are still securities, and issuers must comply with federal disclosure laws.
  • European regulators have updated frameworks to accommodate tokenized stocks, attracting platforms like Robinhood and Gemini.

Issuer

Product Highlights

Robinhood

200+ tokenized U.S. stocks & ETFs for EU users, including NVIDIA, OpenAI, SpaceX

Gemini 

Tokenized shares of Tesla (TSLA), Costco (COST), Palantir (PLTR), Boeing (BA), Coinbase (COIN), Circle(CRCL), Apple (AAPL), Amazon (AMZN), Strategy(MSTR)

Kraken

xStocks service for tokenized U.S. equities (non-U.S. users only)

Other players like Circle, Coinbase, Ondo Finance, and Republic are also expanding tokenized equity offerings.

However, regulatory friction remains:

  • The Bank of Lithuania has requested Robinhood to submit compliance details for OpenAI and SpaceX tokens.
  • OpenAI has publicly denied any partnership with Robinhood, raising concerns over token legitimacy.

Conclusion

Stock tokenization is breaking barriers of time, geography, and access, making equity markets more inclusive. While it won’t fully replace traditional stocks, it’s poised to complement and reshape the future of investing.

Disclaimer: The content of this article solely represents the author's personal opinions and does not reflect the official stance of Tradingkey. It should not be considered as investment advice. The article is intended for reference purposes only, and readers should not base any investment decisions solely on its content. Tradingkey bears no responsibility for any trading outcomes resulting from reliance on this article. Furthermore, Tradingkey cannot guarantee the accuracy of the article's content. Before making any investment decisions, it is advisable to consult an independent financial advisor to fully understand the associated risks.

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