Popular stocks such as Apple, Tesla, and NVIDIA will be traded in token form on the Kraken trading platform

On Thursday, according to media reports, popular U.S. stocks such as Apple, Tesla, and NVIDIA will be traded in token form on the cryptocurrency exchange Kraken. Kraken plans to allow non-U.S. customers to trade stocks like Apple, and this new initiative will launch in the coming weeks.

Kraken plans to launch tokenized versions of over 50 stocks and ETFs. The ETFs planned for tokenization include well-known SPDR S&P 500 ETF and SPDR Gold ETF. Kraken refers to these tokens as "xStocks," which will operate on the Solana blockchain. The blockchain is a decentralized ledger that records cryptocurrency transactions.

The xStocks tokens will be backed by actual shares of the corresponding underlying securities, with Kraken's partner company Backed Finance purchasing new shares as needed. These tokens can be redeemed at the cash value of the underlying securities. Theoretically, the token price should align with the market price of the corresponding stock or ETF.

Similar to Bitcoin, these tokens can be traded around the clock—even during U.S. stock market closures.

Kraken, headquartered in the U.S., has clients in over 190 countries. Kraken stated that these so-called "tokenized stock" products will make it easier for non-U.S. investors to invest in U.S. stocks. Tokenized stocks will be launched in Europe, Latin America, Africa, and Asia; U.S. users will not be able to trade these tokens.

Why put stocks on the blockchain?

In addition to providing the advantage of 24/7 trading, Kraken also stated that tokenized stocks offer international investors a cheaper and simpler way to enter the U.S. stock market.

Kraken co-CEO Arjun Sethi said, "Overseas investors can now buy U.S. stocks through local brokers, but the fees are usually high, and settlement times are slow, leading to a lot of friction."

In the future, investors in xStocks may even trade these tokens on cryptocurrency exchanges outside of Kraken and transfer them to personal crypto wallets, holding them alongside other assets like Bitcoin. Risk-tolerant investors may even use these tokenized stocks of Apple, Tesla, and others as collateral for their cryptocurrency trading strategies.

Attempts at tokenized stocks have been made before

The world's largest cryptocurrency exchange, Binance, launched tokenized products for U.S. stocks like Tesla in 2021, but was forced to take them down a few months later after regulators in multiple countries warned that Binance did not hold the necessary licenses.

Similarly, Kraken must navigate the complex regulatory environment in various countries to ensure the legal issuance of xStocks. A Kraken spokesperson stated that the company is "actively working with multiple regulatory agencies."

Blockchain advocates have long argued that tokenization can outperform traditional securities trading methods in terms of settlement speed, cost, and flexibility. With the Trump administration and the U.S. Congress pushing for new regulations on cryptocurrency trading, this topic has gained renewed attention in recent months. The U.S. Securities and Exchange Commission (SEC) held a roundtable on securities tokenization this month, and well-known Wall Street firms like BlackRock and Robinhood are also actively promoting the development of such products