RWA: A Technical Analysis of Tokenized Stock Implementation

DeFi Protocol Research | Data as of December 2025

In June 2025, Kraken announced the acquisition of Swiss tokenization company BackedFi. That same month, Dinari became the first tokenized stock issuer to obtain a US SEC broker-dealer license. Robinhood deployed 500 stock tokens on Arbitrum in a single day (though technically these are derivative contracts rather than tokenized stocks). Ondo is rapidly expanding its product line, and exchanges like Gate.io have launched dedicated tokenized stock sections.

Tokenized stocks are evolving from “DeFi experiment” to “mainstream financial infrastructure.” But for teams looking to enter this space, the questions are practical: How do you build this? What technical architecture should you use? How do you handle regulations? What are the pitfalls in DeFi integration?

This article breaks down three main technical approaches in the market today—Ondo, BackedFi, and Dinari—analyzing their different choices in token design, compliance architecture, and DeFi compatibility, along with the trade-offs behind each decision.

If you’re considering building a tokenized stock platform, or want to deeply understand the technical details of this sector, this should help.

I. Why Put US Stocks “On-Chain”?

If you’re a non-US resident wanting to buy US stocks, the experience isn’t great. You need to find a broker that accepts international clients, fill out W-8BEN tax forms, and submit a pile of identity documents. After opening an account, you discover US stocks only trade during Eastern Time 9:30 AM to 4:00 PM—for Asian investors, this means staying up all night to watch the market. After buying stocks, funds take T+1 to settle. Want to buy one share of Berkshire Class A? Over $600,000, and most brokers require whole shares only. Cross-border wire transfers? High fees, slow speed, and banks might block them.

Tokenized stocks aim to solve these problems.

Once stocks become on-chain tokens, trading can happen 24 hours (at least 24/5), settlement is instant, one share can be split into 0.0001 units for trading, and funds transfer via stablecoins on-chain, arriving in minutes. Account opening is simplified too—have a wallet, complete KYC, and you can trade.

But the truly interesting part isn’t “buying stocks more conveniently”—it’s composability. When Apple stock becomes an ERC-20 token, it can plug into the DeFi lego—deposit into Aave as collateral to borrow stablecoins, provide liquidity on Uniswap, or use in structured products. This is something traditional brokerage accounts can’t do.

II. Problems to Solve

When building tokenized stocks, the first question isn’t “what technology to use” but “who are you selling to.”

Your target market determines your regulatory path: targeting the US market requires obtaining an SEC broker-dealer license, an extremely high bar; targeting the European market, you can use the Swiss FINMA or MiCA framework; targeting the global non-US market, you can use offshore structures like BVI. This is the first decision: business and regulation.

Once the regulatory path is set, the next question is token design. Should 1 token correspond to 1 share, or to an “economic exposure”? The former is intuitive, but stock splits become problematic—during a split, the system needs to mint new tokens for you, but if the tokens are in a DeFi protocol, who gets the new tokens? The latter is more complex but more DeFi-friendly. This is the second decision: token economics.

Once token design is set, the remaining work is engineering: how to handle issuance and redemption, how to process corporate actions, how to add transfer restrictions. This is the third layer: technical implementation—there are many sub-problems involved. This article only covers a few key ones; for more detailed smart contract implementations handling corporate actions, that would involve deeper knowledge of both equities and DeFi. Readers interested in going deeper can let me know.

Let’s go through each layer.

2.1 Business and Regulation

Let’s start with the basic architecture. Regardless of regulatory path, the essence of tokenized stocks is a mapping relationship:

Diagram

When a user purchases 1 on-chain AAPL token, the issuer buys 1 real Apple share in the custody account and transfers the token to the user. During redemption, the issuer sells the real stock, recovers the token (which can be burned or kept for the next buyer), and returns USD (usually in stablecoin form) to the user.

Ecosystem Roles: Issuer vs Market Maker

There are two main roles in this ecosystem:

Issuer: Companies like BackedFi, Ondo, and Dinari. They’re responsible for setting up SPVs, holding real stocks, and issuing and redeeming tokens. The issuer is the bridge between tokens and real assets.

Market Maker / Distributor: Exchanges like Kraken, Bybit, and Gate.io. They don’t issue tokens but source them from issuers (usually through bulk subscriptions), then provide trading services and liquidity on their platforms.

Example: BackedFi issues AAPLx tokens, Kraken bulk-subscribes a batch of AAPLx from BackedFi, then lets users trade on Kraken’s platform. Users’ counterparty is Kraken (or other users matched by Kraken), not BackedFi directly.

This division means: if you want to do stock tokenization, you can choose to be an issuer (asset-heavy, compliance-heavy), or a distributor (integrating existing issuers’ products).

SPV: The Legal “Bridge”

Most issuers use an SPV (Special Purpose Vehicle) to hold real stocks. An SPV is a specially established company entity, registered in a jurisdiction (like Switzerland or BVI), whose sole business is holding underlying assets. Real stocks are held by custodians (such as Alpaca Securities, InCore Bank, Maerki Baumann, and other licensed brokers/banks) where the SPV has accounts, and tokens issued by the SPV represent economic rights to these assets.

Note that tokens held by users represent rights to SPV assets, not direct stock ownership. This means no shareholder voting rights, dividends must be distributed through the SPV, and you’re relying on the SPV’s and issuer’s creditworthiness.

Three Regulatory Paths

Where the SPV is registered determines your regulatory path.

US SEC compliance is the highest-bar path—requiring registration as a broker-dealer and going through the full securities issuance process. The benefit is the clearest regulatory status and no legal risk serving US users. Currently only Dinari has completed this path.

European MiCA / Swiss FINMA is BackedFi’s chosen path. Establishing an entity in Switzerland or EU, utilizing tokenized securities rules under the MiCA framework. Lower bar than SEC, but the regulatory framework is still maturing.

Offshore structure is Ondo’s chosen path. Ondo Global Markets’ issuing entity “Ondo Global Markets (BVI) Limited” is registered in the British Virgin Islands, operating under the Regulation S exemption framework of US securities law—as long as the securities offering is conducted entirely outside the US and excludes all US investors, SEC registration isn’t required. This path is most flexible but requires strict enforcement of geographic restrictions, and if US users circumvent restrictions via VPN, compliance risks may arise.

Which path to choose depends on target market and risk appetite.

2.2 Token Economics

The legal structure solves “how to map off-chain assets to on-chain.” Next is token design itself: how to define the mapping relationship between tokens and stocks?

Intuitively, 1 token = 1 share, clear and simple. But stocks aren’t static—Apple pays quarterly dividends, Nvidia did a 10:1 stock split, Tesla did a 5:1 split. These corporate actions change stock quantity or value. How do on-chain tokens keep up?

Traditional finance has mature processes: broker systems automatically adjust positions and cost basis in the backend, users see changes when they log in the next day. But blockchain is different—once tokens are minted, they’re scattered across countless addresses, some in user wallets, some in Uniswap pools, some staked in Aave. You can’t “uniformly adjust all accounts” like a broker.

This leads to a core design decision: should tokens track “shares” or “value”?

One approach is Unit Peg (one token = one share): maintain 1 token = 1 share, adjust user token quantities when corporate actions occur. Another approach is Value Peg: token quantity never changes, adjust the “share” each token represents, technically implemented via a “multiplier.”

Example: Suppose you hold 100 Apple tokens, Apple announces a 2:1 split, real stock goes from $200 to $100, shares double. Unit Peg mints 100 additional tokens for you, giving you 200 tokens each worth $100. Sounds intuitive, but here’s the problem—if your tokens are in a Uniswap liquidity pool, who gets the new tokens? The pool or you? In a reverse split (like 1:10 consolidation), the system needs to burn 90% of your tokens, but you can’t burn tokens from someone else’s lending protocol.

Value Peg works differently: you still have 100 tokens, but each token now represents 2 shares instead of 1. Token price is still $200 (2 shares × $100), stock price is $100. Token price and stock price have decoupled, but your economic interest is intact. During a split, only the multiplier updates (from 1.0 to 2.0), no one’s balance is touched.

Dividend handling follows similar logic. Apple announces a $1 per share dividend, you hold 100 tokens. Unit Peg airdrops 100 USDC to you, but if there are 100,000 token holders, each dividend requires 100,000 on-chain transfers—gas costs are too high. And when tokens are collateral in Aave, who gets the dividends? The Aave contract or the depositor? Value Peg accumulates dividends into the token’s NAV (Net Asset Value)—the custody account receives dividends and uses them to purchase more underlying stock, each token represents more assets, and you get more money upon redemption. The market reflects this change through arbitrage.

Value Peg is more DeFi-friendly. Tokens work like wstETH—balance never changes, only the represented value changes. You can confidently put them in lending protocols or liquidity pools without worrying about splits or dividends causing issues. Current mainstream solutions all adopt this design: Ondo calls it “Total Return Tracker,” xStocks calls it “Shares Model with Dynamic Multiplier”—essentially the same idea. Both use standard ERC-20 implementation on EVM; on Solana, xStocks additionally uses Token Extension (Scaled UI Amount) to optimize the display layer.

This is also why when you look at xStocks or Ondo token prices, they differ from the corresponding stock price—the difference is the cumulative effect of all historical splits and dividends.

BackedFi’s product evolution perfectly illustrates this design choice. Their early bTokens series used a rebasing mechanism—similar to Unit Peg, dividends and splits directly change token quantities in wallets. The problem: if you put bTokens in a DeFi protocol, you might “lose” some yield because the protocol doesn’t know how to handle suddenly increased tokens. To mitigate this, they introduced “wrapped” versions (wbTokens), requiring users to manually wrap before safely using in DeFi. Two sets of tokens, extra steps, users get confused. In 2025, they launched the xStocks product line, designed from the ground up with Value Peg + multiplier mechanism, no wrapping needed, DeFi-native from the start. This evolution shows tokenized stock design paradigms are still maturing—lessons from pioneers are worth learning from.

2.3 Technical Implementation

Technical implementation involves many sub-problems; here we’ll highlight a few key ones.

Transfer Restrictions: Legal Layer vs Technical Layer

Tokenized stock compliance has two implementation paths:

Legal layer compliance: The token itself is standard ERC-20, freely transferable on-chain. Compliance is achieved through legal agreements—excluding users from prohibited regions like the US, requiring KYC only at mint/redeem. Ondo and xStocks use this approach. Pros: full DeFi compatibility, tokens can trade on DEXs, serve as lending collateral, enter liquidity pools. Cons: compliance enforcement relies on law rather than technology, regulators may not recognize it.

Technical layer compliance: Smart contracts embed whitelist/blacklist logic, checking sender and receiver identity on every transfer. Wallets that haven’t passed KYC cannot receive tokens. ERC-3643 (also called T-REX protocol) is the standard implementation for such compliant tokens. Dinari’s dShares uses this approach. Pros: compliance is verifiable on-chain, meeting strict regulatory requirements like SEC. Cons: limited DeFi compatibility—tokens can’t trade on regular DEXs, liquidation bots need to complete KYC to participate in liquidations.

There’s a third path: issuing derivatives directly. Robinhood’s Stock Tokens are this type—users purchase derivative contracts tracking stock prices, not tokenized stocks, and tokens cannot be transferred to other wallets at all. This bypasses tokenized stock regulatory complexity but completely loses DeFi composability.

Compliance Approach	Representative Projects	On-chain Transfer	DeFi Compatible	Regulatory Certainty
Legal Layer	Ondo, xStocks	✅ freely transferable	✅ Fully compatible	Lower
Technical Layer	Dinari	❌ Whitelist required	❌ Limited	Higher
Derivatives Framework	Robinhood	❌ No transfers	❌ Incompatible	Higher

This choice reflects a core trade-off: DeFi compatibility vs regulatory certainty. If you’re building for the DeFi ecosystem, legal layer compliance is necessary; if you need SEC licensing or target traditional financial institutions, technical layer compliance is safer.

Issuance and Redemption Flow

The issuance and redemption flow is more complex than it appears. During subscription, the system receives stablecoins, purchases real stocks, and mints tokens; redemption is the reverse. But real stock trading has quotes, slippage, and T+1 settlement delays—all need to be handled in the flow.

Corporate Action Processing

We covered splits and dividends earlier, but there are also stock dividends, M&A, delisting, warrant distributions, and more. You need reliable corporate action data sources—Chainlink is working with DTCC on this. With 100,000+ token holders, batch updates also need to consider gas costs.

All these problems have solutions, but each involves trade-offs. For specific implementations, refer to public documentation from Ondo, BackedFi, and Dinari.

III. Major Market Players

We’ve covered the framework; now let’s see how Ondo, BackedFi, and Dinari made their choices at each layer.

Ondo: Offshore Structure, Largest Scale

Ondo Finance started with OUSG (tokenized US Treasuries) and is a leading player in the RWA space. In 2025, they launched Ondo Global Markets, officially entering tokenized stocks.

Ondo chose the offshore route: the issuing entity is in BVI (British Virgin Islands), explicitly excluding US users. Supported assets include Apple, Nvidia, Tesla, Coinbase, and 100+ other stocks and ETFs, deployed on Ethereum, Solana, and other chains. Mint/redeem window is 24×5 (24 hours on business days), but tokens can trade 24×7 on CEXs (like Gate.io, MEXC), with lower weekend liquidity. Token design uses the Total Return Tracker model—dividends are automatically reinvested into token value, token quantity stays constant but value increases, meaning one token may represent more than one share of economic exposure over time.

User restrictions: US residents are completely prohibited; mainland China, Canada, Russia are also on the prohibited list; EU, Hong Kong, Singapore require meeting “professional investor” thresholds.

Ondo is currently the largest tokenized stock issuer with the best liquidity and most developed ecosystem partnerships.

Purchase channels: Ondo tokens are freely transferable on-chain with no technical transfer restrictions, can be swapped on DEXs, and used in DeFi protocols. Currently, direct mint/redeem from the Ondo platform is only open to institutional users; retail users need to purchase through CEXs (Gate.io, MEXC, Bitget) or DEXs. Compliance restrictions are at the legal layer, not technical—users from prohibited regions like the US cannot complete Ondo’s KYC and thus cannot directly mint/redeem.

Risk-wise, Ondo relies on the BVI entity’s legal framework; the regulatory environment for non-US residents is relatively ambiguous.

BackedFi: European MiCA Route, DeFi-Native Design

BackedFi is a Swiss company focused on European compliance markets. Acquired by Kraken in December 2025, signaling mainstream crypto exchanges’ entry into tokenized securities.

BackedFi chose the European route: the issuing entity Backed Assets GmbH is in Switzerland, regulated by FINMA, compliant with EU’s MiCA framework. They partner with Chainlink to provide Proof of Reserve, offering higher transparency.

Product-wise, BackedFi has two product lines. Early bTokens (bCOIN, bNVDA, bTSLA, etc.) used rebasing mechanism—mentioned earlier, they hit several pitfalls. The new xStocks (NVDAx, AAPLx, TSLAx, and 60+ other stocks) use Value Peg + multiplier mechanism, designed for DeFi. xStocks can be purchased on Kraken, Bybit, and other CEXs.

User restrictions: US residents prohibited; European users have relatively easier access.

xStocks DeFi Design

xStocks, like Ondo, uses legal layer compliance—tokens themselves are standard ERC-20, freely transferable on-chain, KYC only required at mint/redeem. This allows xStocks to trade freely on DEXs, serve as lending collateral, and enter liquidity pools without additional whitelist verification.

BackedFi is negotiating integrations with multiple lending protocols. Due to no on-chain transfer restrictions, liquidation bots can participate permissionlessly—a key advantage over Dinari (which requires whitelisting).

Dinari: US SEC Compliance Route

Dinari is the only tokenized stock issuer to obtain US SEC broker-dealer registration, approved in June 2025. This is the highest-bar, clearest regulatory path.

Dinari’s product is called dShares, supporting SPY (S&P 500 ETF) and individual stocks, deployed on Ethereum and Arbitrum. Currently mainly serves non-US users (via Regulation S); US domestic product launching soon.

Key difference from Ondo/xStocks: on-chain transfer restrictions. Dinari’s dShares embed whitelist/blacklist mechanisms in smart contracts; user wallet addresses must pass KYC verification before trading. According to Dinari’s official documentation: “Wallet addresses must be whitelisted by our KYC and AML processes before trading is allowed.” This means dShares cannot trade freely on DEXs and cannot be used arbitrarily in DeFi protocols—all trading must go through Dinari’s platform, limited to US stock trading hours.

This is an important design trade-off: Dinari chose to sacrifice DeFi compatibility for stronger regulatory certainty. For an issuer holding an SEC license, on-chain enforcement of transfer restrictions is necessary to meet US securities regulations.

Dinari has a unique positioning: they offer a “White Label” model, providing tokenized stock infrastructure for other platforms. If you want to be a distributor without getting your own license, you can use Dinari’s infrastructure.

Risk-wise, Dinari’s product line is relatively new, smaller scale, and US domestic product hasn’t officially launched yet.

A quick comparison of the three:

Dimension	Ondo	BackedFi	Dinari
Headquarters	US (issuing entity in BVI)	Switzerland	US
Regulatory Framework	Offshore (BVI)	Swiss FINMA + MiCA	US SEC
US Users	❌ Prohibited	❌ Prohibited	⏳ Coming soon
European Users	⚠️ Professional investor required	✅ Relatively accessible	⚠️ KYC required
Asian Users	⚠️ Depends on country	⚠️ Depends on country	⚠️ KYC required
Product Scale	Largest	Medium (expanding post-Kraken acquisition)	Smaller (new entrant)
Transparency	Medium	High (Chainlink PoR)	High (SEC compliant)
Target Users	Non-US institutions and HNWIs	European users, DeFi players	Users awaiting US compliance

Robinhood: Derivatives Route (Not Tokenized Stocks)

Worth mentioning is Robinhood’s “Stock Tokens”—an easily confused product. Robinhood’s Stock Tokens launched in the European market in 2025 are not tokenized stocks but derivative contracts. According to official documentation, users purchase derivatives tracking stock prices, granting no underlying stock rights, and tokens cannot be transferred to other wallets at all.

Robinhood chose the derivatives route for faster compliance under EU’s MiFID II framework, but the cost is the product cannot integrate with the DeFi ecosystem at all. For detailed comparison of different compliance routes, see “2.3 Technical Implementation” above.

More Entrants

This space is heating up fast. Gate.io launched its xStocks section in July 2025, and Bybit is also actively integrating tokenized stock products. Japan’s SBI Holdings is also planning to launch a blockchain stock tokenization platform.

When Kraken and other platforms with tens of millions of users start offering tokenized stocks, market scale will see a qualitative change.

IV. Risks

Tokenized stocks aren’t “better stocks”—they have unique risks.

Custody risk: Your real stocks are held by SPVs and custodians. If the SPV goes bankrupt, the custodian has issues, or the issuer disappears, your on-chain tokens could become worthless. While legal frameworks offer protection, cross-border recovery is extremely costly. Choosing products with Proof of Reserve (like BackedFi + Chainlink) can reduce some risk.

Regulatory risk: Tokenized stocks exist in a regulatory gray zone. The US SEC has explicitly warned that unregistered tokenized stocks are illegal securities; Dinari is currently the only exception. The EU MiCA framework provides some certainty, but details are still being refined. Asian countries have varying policies. Regulatory changes could force platforms to shut down or tokens to be forcibly redeemed.

Liquidity risk: Tokenized stock secondary market liquidity is far lower than real stocks. An on-chain AAPL pool on Uniswap might only have tens of thousands of dollars in depth; large trades will have significant slippage; during market panic, exiting may be difficult.

Price de-pegging risk: Theoretically, on-chain tokens should match real stock prices, but during US market closure, on-chain prices may diverge. Arbitrage mechanisms rely on redemption channels; if redemption is blocked, prices may de-peg. In extreme cases (like issuer credit crisis), significant discounts may occur.

Tax complexity: How are dividend withholding taxes handled? How are capital gains calculated? How do you file cross-border taxes? Most issuers don’t provide tax advice; responsibility falls on users.

V. Outlook

Where will tokenized stocks go from here?

Regulation will gradually clarify. Dinari obtaining an SEC license is a signal; the US market compliance path is opening. Expect more issuers to obtain compliant status in the next 1-2 years.

Institutions will continue entering. Kraken acquiring BackedFi, Robinhood deploying 500 stocks—these moves show mainstream financial institutions are taking this space seriously. BlackRock, Fidelity, and other asset management giants are watching tokenization; Coinbase and Binance may launch similar products.

DeFi integration will deepen. The real potential of tokenized stocks lies in composability—using on-chain Tesla stock as lending collateral, creating stock index tokens, developing on-chain options. But this requires solving the “permissioned DeFi” contradiction: compliant tokens inherently have transfer restrictions; how do they integrate with permissionless DeFi protocols?

Conclusion

If you’re considering building tokenized stocks, there are three core decision points.

First, target market determines regulatory path. For European users, go Swiss/MiCA, reference BackedFi; for global non-US users, go offshore, reference Ondo; for the US market, you must go SEC compliant—currently only Dinari has done this.

Second, DeFi integration depth determines token design. If only doing centralized trading, Unit Peg (1 token = 1 share) is acceptable; if integrating with DeFi, Value Peg + multiplier mechanism is essential, otherwise stock splits will disrupt all lending and LP positions.

Third, compliance implementation determines DeFi compatibility. If pursuing full DeFi composability, use standard ERC-20 + legal layer compliance like Ondo/xStocks (KYC only at mint/redeem); if needing strict regulatory recognition like SEC, implement whitelist/blacklist at the contract layer like Dinari—the cost is limited DeFi compatibility, and liquidation bots need to complete KYC to participate.

BackedFi’s evolution from bTokens to xStocks shows design paradigms in this field are still forming. Early entrants will inevitably hit pitfalls, but also have opportunities to define standards.

The real value of tokenized stocks isn’t “making stock buying more convenient”—traditional brokers already do that. The value is turning traditional financial assets into programmable, composable DeFi legos. This vision isn’t realized yet, but the direction is clear.

Updated: December 20, 2025 Disclaimer: This article is for technical research only and does not constitute investment or legal advice. Tokenized stocks involve complex regulatory issues; consult professional lawyers before implementation.

References

Alpaca Markets (2025). Ondo Finance and Alpaca Collaborate to Tokenize US Stocks and ETFs. https://alpaca.markets/blog/ondo-finance-and-alpaca-collaborate-to-tokenize-us-stocks-and-etfs
Backed Assets. Product Structure. https://assets.backed.fi/structure
Backed Assets. xStock Product Details (Cisco Example). https://assets.backed.fi/products/cisco-xstock
BackedFi. xStocks Documentation. https://backed.fi
Dinari. Arbitrum STEP Application (2024). https://forum.arbitrum.foundation/t/dinari-dshares-usfr-d-spy-d-step-application/23456
Dinari. Official Documentation. https://docs.dinari.com/docs/quickstart
Ondo Finance. Corporate Actions. https://docs.ondo.finance/ondo-global-markets/corporate-actions
Ondo Finance. Global Markets Overview. https://docs.ondo.finance/ondo-global-markets/overview
Ondo Finance. Ondo Global Markets Eligibility. https://docs.ondo.finance/ondo-global-markets/eligibility
Ondo Finance (2025). An Open Letter: The Growing Role of Tokenized Securities. https://ondo.finance/blog/the-growing-role-of-tokenized-securities
Robinhood EU. Stock Tokens FAQ. https://robinhood.com/eu/support/articles/stock-tokens-faq/
Robinhood EU. Stock Tokens Overview. https://robinhood.com/eu/support/articles/stock-tokens-overview/
RWA.xyz. Tokenized Securities Dashboard. https://www.rwa.xyz
SSRN (2025). Tokenized Stocks. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5937314
xStocks. Dividends & Stock Splits Technical Overview. https://docs.xstocks.fi/overview/dividends-and-stock-splits/dividends-and-stock-splits-technical-overview
xStocks. Products Overview. https://docs.xstocks.fi/overview/products

❦ ❦ ❦