Everyone is doing Tokenized Stocks wrong

There’s been a great misunderstanding of what tokenized stocks are, and who they’re for.

Tokenized stocks are not equivalent to another “crypto asset to be traded,” contrary to how they’re being treated among the exchanges and wallets who’ve haphazardly implemented them.

My view is that tokenized stocks are far more comparable to stablecoins than they are to crypto assets: in adoption profile, and in utility.

Stablecoins are blockchain’s greatest product to date because they make the dollar permissionless.

Tokenized stocks are the next because they do the same for U.S. equities.

Why are stablecoins valuable, and who are they most useful for? The answer is straightforward: stablecoins, specifically USD-pegged ones like USDC, are a democratization of the ability to hold and spend a stable medium of exchange.

For U.S. citizens, USDC’s primary value proposition is unobstructed, lower-cost value transfer (often more valuable for international transfer rather than domestic). Whereas for emerging markets, the value proposition is protection from inflation, access to advanced financial instruments, and stable exchange (locally and internationally). USDC is a Freedom Technology, because it exports stability.

Because of this, it’s no surprise that stablecoins have been most successful in penetrating retail within emerging markets.

Stablecoin penetration is well under 10% in the United States¹, primarily because its core features are already met or rivaled by the public and private infrastructure we have access to.

Nigeria has around 40% crypto adoption among its adult population², with stablecoins comprising roughly 40% of all Nigerian crypto activity³: a figure that is climbing rapidly year-over-year. Vietnam has around 18% crypto adoption, sitting fourth globally on the Chainalysis Adoption Index⁴, with stablecoin penetration likely close to 10%, if not higher. That’s a lot of people, with a ton of room to grow.

This goes on as a trend, and we tend to see higher stablecoin adoption based on the stability of a region’s currency. Argentina, for example, sits at around 20% crypto adoption⁵, with stablecoins now accounting for more than half of all centralized-exchange purchases denominated in Argentine pesos⁶.

The stablecoin thesis is consistent here and has already won the hearts and minds of Silicon Valley, for good reason.

I agree!

Who are tokenized stocks for? Well, the same people that stablecoins are for: emerging markets that benefit from high-quality financial instruments.

Tokenized stocks and stablecoins are tightly linked, they both converge on the same audience, and benefit that audience in similar ways. With the core difference being that tokenized stocks export growth, while stablecoins export stability.

This means that tokenized stocks need to be offered in a similar capacity to stablecoins: they must be permissionless, and they must be USDC-native.

They need to be openly available for anyone, in virtually any region, to buy using USDC they hold onchain in less than 30 seconds, without paying enormous spread.

The stablecoin thesis is such that billions will have open, free, permissionless access to the U.S. dollar (or other currencies), untied from traditional finance rails and oversight.

The tokenized stock thesis should be exactly the same.

As of today, tokenized stocks sit in an awkward middle ground, useful to almost nobody at the scale they should be.

They’re almost-exclusively offered in a serious capacity (meaning, not on a DEX with a $50K liquidity pool) on offchain, permissioned exchanges. This phenomenon represents a complete misunderstanding of the core value of these assets.

If tokenized stocks are only ever offered through primarily permissioned rails, which are essentially just onchain receipts of brokerage transactions, with the same limitations and requirements, they aren’t much better than just using traditional brokers, like IBKR.

And as a result, the penetration has been horrible.

Stablecoins have hundreds of millions of users⁸. Tokenized stocks, even counting both onchain holders and centralized-exchange users, have fewer than 500,000⁹. After more than a year of “launches” from major exchanges, the entire vertical’s cumulative trading volume, roughly $50 billion across all venues, is less than two days of NVDA trading¹⁰.

Your favorite centralized exchange #23 introducing tokenized stocks will not change this, because it fails to address the core problem.

The core problem is this: tokenized stocks have been miscategorized, forced into a grey area between permissioned TradFi securities and crypto assets. They’re neither. They’re open, onchain rails for participation in the U.S. economy.

If stablecoins are the foundation of the new global digital economy, tokenized stocks are the pillars.

To realize the full potential of these assets, they must be implemented in such a way that matches this trajectory: