Editor | Wu Talks Blockchain

In this episode of the Wu Says podcast, Valentin Gui, Head of xStocks at Kraken, shares his thoughts on stock tokenization. xStocks is a collaborative project between Kraken, Backed, and Solana that aims to provide fully-collateralized synthetic exposure to real stocks to users around the world, especially those without direct access to the stock market.

Valentin discussed how xStocks differentiates itself from competitors like Robinhood, how it addresses global regulatory challenges, and revealed the platform's future expansion plans. He emphasized xStocks' open nature—its permissionless nature, support for multi-chain deployment, and its consortium-based model for fostering collaboration—and expressed its long-term vision of becoming part of Web3 financial infrastructure.

For the full audio, please search for "Wu Shuo" on mainstream audio platforms at home and abroad, such as Xiaoyuzhou. This article does not constitute any investment advice, and the author's views do not represent those of Wu Shuo. Readers are advised to strictly abide by local laws and regulations.

Clarifying xStocks’ background and token staking mechanism

Ehan: Can you talk about the origins of the xStocks project? Some in the community have questions about the previous project, DAOStack, and its failed ICO. Can you explain what happened back then and how that impacted xStocks?

Valentin: Absolutely. First, let me clarify: I'm the General Manager of xStocks, a subsidiary of Kraken. We partner with Backed, the issuer of these tokens. I assume your question refers to a company or project our partner has previously worked on. However, the core reason we joined xStocks was its robust architecture and clear future direction. The initial partnership was between Kraken, Backed, and Solana, and we're now expanding this collaboration to more centralized exchanges and on-chain ecosystems.

We particularly value its rigorous token issuance model, which minimizes common risks. Unlike many tokens, each xStocks token is fully collateralized 1:1 by real stock. Tokens can only be issued after the underlying stock has been purchased and held by a custodian. We strongly support this "asset first, token later" approach because it ensures that each token is backed by real value.

Why Tokenize Equities: Achieving Global Financial Inclusion with Synthetic Assets

Ehan: Why did xStocks choose stock tokenization? What problems does it mainly solve?

Valentin: That's a great question. Essentially, we're trying to enable users and investors to access the stock market through on-chain means, especially those who previously lacked access to stocks. One of Kraken's missions is to promote global financial inclusion, and we're particularly focused on how tokenization can make traditional assets like the US stock market more accessible to more people.

Of course, users don’t actually buy these stocks, nor do they own the rights to the stocks themselves. Instead, they gain “synthetic exposure” to the performance of these stocks through tokens. That is, they can benefit from stock price fluctuations without holding actual stocks.

Kraken's layout and cooperation with RWA promoted the implementation of xStocks

Ehan: xStocks has strong support from Kraken. How did this partnership come about? How did it achieve widespread circulation on centralized exchanges and DeFi platforms?

Valentin: That's a great question, too. I can elaborate on Kraken, as I'm a key participant in this collaboration. Kraken has always wanted to participate more in the RWA (Real World Asset) space, bringing these traditional assets onto the blockchain. When evaluating RWAs suitable for tokenization, we focused on stocks because they are highly recognized and familiar to users worldwide. However, many people don't have the ability to buy stocks directly, so we considered whether we could create "synthetic tokens" that would allow users to benefit from stock performance without actually owning the shares.

Initially, we considered issuing our own tokens directly, but after consulting with several companies, we ultimately decided to partner with Backed because they already had a comprehensive and established process. Solana also joined us at this stage, and the three of us built a comprehensive collaborative framework.

xStocks' rapid adoption by other centralized and decentralized exchanges is largely due to our open partnership model. Kraken was the first centralized exchange to list, but other platforms could also directly sign agreements with Backed and issue xStocks tokens independently. Kraken doesn't have any "privileges"; we're simply the first to participate. This open, consortium-based partnership model is key to xStocks' rapid expansion.

Key differences from Robinhood: openness and multi-chain circulation

Ehan: Some people might compare xStocks to existing platforms like Robinhood. What are the differences?

Valentin: That's a great question. Robinhood also launched its own stock tokenization product in early July. But the core difference between the two is that xStocks is permissionless, while Robinhood's product is closed.

For example, although you can buy stock tokens on Robinhood, these tokens can only be used within Robinhood’s own platform and cannot be transferred out or circulated on other chains.

xStocks is completely open. You can keep these tokens yourself and transfer them to any DEX or dApp for use, supported by the entire Web3 ecosystem. Furthermore, xStocks is multi-chain—initial launch is on Solana, with BNB Chain and Injective coming soon, and we're in discussions with several other chains. This means users can freely use these tokens across chains, without platform restrictions.

Not afraid of competition: Binance and Coinbase are welcome to participate

Ehan: Are you worried about leading platforms like Binance or Coinbase launching similar products?

Valentin: We're not actually worried about competition. Frankly, we hope they'll join us in this endeavor. We designed this collaborative mechanism so that participants like Binance and Coinbase can easily join. They simply need to work with our issuing partner, Backed, to come up with a plan that works for them.

From the outset, we've designed xStocks to be an open and inclusive alliance. If they choose not to join and choose to develop their own, that's fine with us. But our door is always open—any organization willing to participate is welcome. We hope to build this ecosystem into an industry standard, benefiting as many people as possible.

Solving the liquidity challenges of centralized and decentralized exchanges

Ehan: Some people have reported that xStocks does not have enough liquidity on centralized exchanges. How can this problem be solved?

Valentin: That's a great question. At Kraken, we've taken liquidity very seriously from the outset and have made extensive preparations. Kraken isn't currently experiencing significant liquidity issues, primarily due to our strategies for inventory building and asset deployment.

Of course, I've heard that some other DEXs and centralized exchanges have indeed encountered challenges in this regard. However, we believe that as the ecosystem matures, this problem will gradually improve. Backed is also taking some measures to improve liquidity, though you'll have to ask them for the specifics. However, from what I understand, the Backed team and other participating exchanges are actively working on this.

US Regulatory Challenges: How xStocks Differs from FTX, Binance's Failed Attempts

Ehan: Let's talk about the US regulatory environment. What are your thoughts on the current regulatory opportunities and challenges in the US? For example, has Trump's election and the SEC's policies impacted the development of xStocks? Previous attempts at tokenized stocks, such as those by FTX and Binance, have failed. How is xStocks different?

Valentin: That's a very good question. Indeed, the current political and regulatory environment in the United States, especially the policy direction under the Trump administration and the SEC's stance, have had a significant impact on our strategy.

xStocks is intentionally not available in the US at this time. This was a joint decision between us and our partners. Due to the lack of a clear regulatory framework in the US, and our lack of relevant compliance licenses, Kraken will not currently offer this service to US users, and the entire product is unavailable in the US.

Of course, we are actively communicating with regulators and hope to find a viable compliance path in the future. However, until then, xStocks will not be available in the US market. We don't want to repeat the same path that has led to failure due to regulatory issues.

Complying with securities regulations: xStocks will be launched in Europe through a Cyprus entity

Ehan: Hester Peirce mentioned today that any tokenized securities must comply with existing securities laws. How will this impact xStocks?

Valentin: Definitely. Kraken takes compliance very seriously, and regardless of when or how we launch, we take it seriously. For example, in Europe, we will be launching xStocks in the coming days, but through an entity established in Cyprus.

This entity has been approved by the Cyprus Securities and Exchange Commission (CySEC) and is authorized as a licensed financial intermediary under MiFID II (Markets in Financial Instruments Directive). As such, xStocks will be offered in Europe as a MiFID II compliant product.

This is why we haven’t launched in the US yet — the US doesn’t have a clear regulatory framework yet, nor do we have the necessary approvals. We will consider launching xStocks in the US only after we obtain all necessary regulatory approvals.

Key regulatory challenges: How to define the legal attributes of xStocks

Ehan: What is the biggest regulatory hurdle that xStocks currently faces?

Valentin: The biggest issue is getting regulators — especially in Europe and the US — to really understand what xStocks is and how it should be classified.

There are currently three possible classifications: digital assets, debt instruments, and securities. Regulators in different countries may have different understandings and judgments.

Therefore, every interaction with regulators requires additional discussion around this classification. They also raise numerous questions about how xStocks operates and how to protect investor rights. Kraken takes this very seriously, and it remains a core part of our ongoing dialogue with regulators.

Exploring opportunities in pre-IPO equity tokenization

Ehan: Pre-IPO equity is a very exciting space. Does xStocks have plans to enter this market?

Valentin: This is indeed a direction we are very interested in and are already actively discussing. I can't reveal too many details at the moment, but we are closely monitoring related opportunities and hope to have more to share in the coming weeks.

xStocks 2025 Roadmap: Global Expansion, Enhanced Token Utility, and Expanded Product Offerings

Ehan: Can you talk more about xStocks’ future development plans?

Valentin: Absolutely. One of our key goals this year is to continue expanding our market reach. xStocks is currently live in Asia, Africa, and Latin America, with a European launch coming soon. We also hope to enter the US market by the end of the year. This is a very high priority for us.

At the same time, we are also working hard to improve the practicality of these tokens, such as supporting leveraged trading and allowing users to use these tokens as collateral to participate in financial activities such as lending. Such features will greatly enrich user usage scenarios and make assets more dynamic.

We also plan to significantly expand our token offerings: We currently have approximately 61 tokens listed, and we hope to have several hundred by the end of the year.

The potential of perpetual contracts and derivatives in tokenized stocks

Ehan: What do you think about launching perpetual contracts for tokenized stocks?

Valentin: This is an area worthy of significant attention. When we talk about derivatives, such as leveraged trading and options trading, perpetual contracts undoubtedly play a key role in this ecosystem. This is also one of the areas we are actively exploring this year.

Growth Outlook: Global Demand for Tokenized Equities Drives Continued Expansion

Ehan: Do you expect this market to grow significantly in the future?

Valentin: Absolutely. In fact, it's already growing rapidly. The total market capitalization of global stocks is in the tens of trillions of dollars, and we've seen strong demand from users for on-chain exposure to these assets. As we and our partner Backed continue to bring more stock assets onto the blockchain and make them available to users, we expect this sector to continue to grow steadily.

Platforms like Robinhood have also begun to enter this field, which in itself shows that the overall market for tokenized stocks is expanding.

Collaboration with Gate.io and potential collaboration with platforms like Hyperliquid

Ehan: Has Gate.io launched a similar product? Are you collaborating with platforms like Hyperliquid?

Valentin: You mentioned Gate.io. Yes, they're now part of our alliance. They've already launched xStocks, and we're excited to be a part of this partnership. It's a crucial component of our broader market expansion strategy.

As for Hyperliquid, I'm not in a position to comment specifically at this time. I hope to have more information publicly available in the coming weeks. We're in discussions with multiple platforms across the ecosystem, some of which are still in negotiation or haven't officially launched yet, so I won't mention any specifics until they're officially confirmed.

Explore potential collaboration with Trump family projects

Ehan: Will the Trump family's project be involved in stock tokenization? Have you communicated or discussed this with them?

Valentin: We have indeed had some communication, and there is currently some work being carried out in this direction. Although there is no new progress that can be made public at the moment, we know that they are interested in exploring the field of tokenization.

IPO and Token Issuance: Possible Paths for Backed’s Future Development

Ehan: Looking ahead, will xStocks prefer to issue its own tokens or go the traditional IPO route?

Valentin: I think xStocks—or more accurately, Backed as the issuer—will most likely choose a traditional IPO. However, this question is more appropriate to ask the Backed team directly. I'll make sure they have a chance to respond to this topic later.

Will tokenized stocks replace traditional stocks?

Ehan: Do you think stock tokenization will completely replace the traditional stock market in the future?

Valentin: I don't think it will completely replace the traditional stock market. Traditional stocks still have many important use cases—at least from Kraken's perspective. We're excited about xStocks and tokenized stocks because they can complement traditional stocks, providing investors with a more complete and diverse product portfolio and usage methods. This is what's really exciting about this track.

Is it possible for tokenized stocks to completely replace traditional stocks? Perhaps, but it’s more likely that the two will merge, ultimately forming a new form that combines the advantages of both models.

Expanding beyond the US: Exploring the tokenization of Hong Kong and Chinese stock markets

Ehan: Is it possible to launch products other than US stocks in the future, such as Hong Kong stocks or Chinese stocks?

Valentin: Absolutely. We've already discussed this with the Backed team. As long as they can acquire the underlying stocks in a compliant and transparent manner, there are no technical barriers preventing us from listing stocks from Hong Kong, China, or other markets.

Building a cross-chain ecosystem: Enhancing the utility of tokenized stocks

Ehan: Is there anything else you would like to share with our listeners?

Valentin: Absolutely. What we're most excited about right now is the future potential of xStocks. As I mentioned earlier, Kraken is a partner on this project, and we're actively supporting Backed, Solana, and other upcoming blockchain networks. We're also working to get more centralized exchanges on board, hoping that xStocks can become one of the industry standards for tokenized stocks.

Once this standard is established, we can provide investors and users with the best liquidity and seamless cross-chain and cross-exchange experience. This is why we adopted an alliance and open cooperation model from the beginning.

More tokenized stocks will be launched in the future, and we will continue to explore new use cases and expand the use cases of these tokens. As the application scenarios expand, demand will also grow accordingly.

The key to mass adoption of tokenized stocks: accessibility

Ehan: Looking ahead to the next two to three years, what do you think will be the biggest driver for the mass adoption of tokenized stocks?

Valentin: I think the key is accessibility—ensuring that any user can access tokenized stocks with a single click. What excites us about tokenized stocks is that people already have a basic understanding of "stocks," even if they're not deep crypto users. And when you explain that it's a tokenized representation of a US stock, providing a synthetic return tied to the stock's performance, they quickly grasp the concept.

We believe that lowering the barrier to entry and increasing the usability of tokenized shares will bring more users into the crypto world and expand the entire market. Therefore, "accessibility" will be a core driving force from promoting the popularity of tokenized shares to promoting the growth of the entire crypto industry.

Long-term vision: xStocks will become the underlying infrastructure of Web3 finance

Ehan: What is your long-term vision for xStocks? Is it more of an infrastructure for the entire Web3 financial system, or a product centered around retail users?

Valentin: We do position it as the infrastructure for the financial services ecosystem. At Kraken, when we plan our future roadmap, we don't strictly distinguish between traditional stocks and tokenized stocks—we will offer both. Our focus is on how to combine the two to create new and valuable experiences for end users.

In many cases, we believe tokenized stocks will gradually become the default way for users to gain exposure to US and international equities. This is exactly the path xStocks is taking towards infrastructure evolution — from a user's perspective, it won't even matter whether they hold a tokenized version or a traditional stock.

Of course, we must be cautious. Tokenized shares currently do not give users ownership of the underlying shares, but from a practical perspective, tokenized shares have many unique advantages that make them very attractive.

Market Misconception: Underestimating the Global Demand and Market Size of Tokenized Stocks

Ehan: What do you think is the biggest misunderstanding that most people — and even some VCs — have about tokenized stocks?

Valentin: I think they underestimated how big this market could be. From my observations in the US, many investors, especially those in the US or the Western Hemisphere, don't really realize the strong demand for global equity exposure. There are a large number of users around the world who are eager to invest in US stocks and other international markets.

Tokenized stocks offer a new path for these users, allowing them to earn returns based on performance in the form of synthetic assets. This potential is currently being overlooked by many. In reality, the market demand is far broader and deeper than many imagine.