Ethereum-based Fintech Platforms Kraken and Backed Introduce Tokenized Shares of Traditional Stocks as ERC-20 Tokens

In a move that signifies the growing trend of bringing real-world assets onto blockchain technology, known as tokenization, Kraken and Backed have announced the expansion of their xStocks product to the Ethereum network.

The success of xStocks on other networks, with a trading volume of $3.5 billion since June, has led to this expansion. This move reflects the companies' commitment to making tokenized equities accessible across various blockchain ecosystems as part of a multi-chain strategy.

xStocks can now interact with Ethereum's DeFi protocols, potentially opening up opportunities for use in lending, borrowing, and collateral. This integration bridges the gap between traditional finance and the cryptocurrency world, allowing investment in familiar equities with blockchain's flexibility and 24/7 trading.

The xStocks product enables eligible Kraken users to deposit and withdraw tokenized stocks and ETFs directly on Ethereum. These digital tokens are fully backed by real equities at a 1:1 ratio. Kraken and Backed are launching xStocks on Ethereum as ERC-20 tokens, making them compatible with thousands of decentralized applications on the network.

The regulatory authorities responsible for the tokenized stock activities of Kraken and Backed on the Ethereum blockchain include the U.S. Securities and Exchange Commission (SEC) in the United States, which engages in regulatory dialogue with Kraken's digital asset exchange regarding tokenization, and EU financial market regulators overseeing MiFID II in Europe. In Europe, platforms must adhere to MiFID II and national financial supervisory authorities such as BaFin in Germany.

There are concerns about limited shareholder rights and regulatory complexities with tokenized stocks due to varying jurisdictional approaches. However, Kraken works with the SEC task force on crypto regulations, while European platforms must comply with MiFID II and national financial supervisory authorities.

The rollout on Ethereum is not the only move by major players in the cryptocurrency industry that focuses on bringing traditional financial instruments onto blockchain technology. Other major players like Gemini and Robinhood have also introduced tokenized U.S. stocks for European users.

Users can now move these tokenized stocks between the exchange and self-custodial wallets, increasing the potential utility and reach of xStocks in the broader cryptocurrency ecosystem. Kraken co-CEO Arjun Sethi stated that their multi-chain strategy ensures tokenized equities are accessible across ecosystems, portable between wallets and protocols, and composable within the applications users already trust.

This move is part of a larger trend in the cryptocurrency industry that aims to increase the potential utility and reach of tokenized stocks in the broader cryptocurrency ecosystem. The expansion of xStocks to Ethereum is expected to further solidify Kraken and Backed's position as leaders in the tokenization of traditional financial instruments.

Ethereum-based Fintech Platforms Kraken and Backed Introduce Tokenized Shares of Traditional Stocks as ERC-20 Tokens