Written by: Wu Says Blockchain

This article does not constitute any investment advice. Readers are advised to strictly comply with the laws and regulations of their location and not to participate in illegal financial activities.

On June 30, 2025, cryptocurrency exchanges Bybit and Kraken announced the launch of the xStocks product provided by the Swiss compliant asset tokenization platform Backed Finance. xStocks is a series of tokens backed 1:1 by real stocks, with the underlying assets held by regulated third-party custodians (such as InCore Bank and Maerki Baumann, among other Swiss banks). These tokens are issued under the SPL standard on the Solana public chain, supporting 24/7 trading and on-chain instant settlement, breaking the time and geographical limitations of traditional stock markets. According to compliance requirements, xStocks is currently only available to non-U.S. users, and U.S. individuals are prohibited from purchasing or holding this product. Subsequently, many leading platforms such as Cryptocom and GMGN also launched xStocks.

Team Background

According to LinkedIn, the three co-founders of Backed Finance previously worked on the now-defunct DAOstack project. DAOstack raised nearly $30 million through private placements, pre-sales, and public fundraising from Q4 2017 to May 2018, with financing prices ranging from $0.708 to $0.9423. Major investors included Cultu.re, Endor Protocol, Gnosis, and Menlo One. However, the price of the GEN token significantly dropped after May 2021 and eventually approached zero. By the end of 2022, DAOstack officially shut down. This relatively negative team background has also sparked community discussions.

In 2021, inspired by the widespread application of stablecoins, the three founders left DAOstack to establish Backed Finance, aiming to bring traditional assets like stocks into the blockchain system in a compliant manner. Between 2021 and 2022, Backed completed project feasibility validation and seed round financing, establishing partnerships with custodial banks and brokerages, and received EU regulatory approval for the relevant product prospectus. In 2023, the first batch of products was launched, with a cumulative issuance scale exceeding $50 million. In April 2024, Backed completed a $9.5 million Series A financing round, led by Gnosis, with participation from institutions such as Exor Seeds, Cyber Fund, and Mindset Ventures.

Product System and On-Chain Deployment

Backed Finance currently offers on-chain tokenized securities services covering global blue-chip stocks, index funds, and short-term bonds through two main product lines—xStocks and bTokens. All tokens are backed by 1:1 physical assets and have ISIN numbers approved by EU compliance. The products have been issued on mainstream public chains such as Ethereum, Solana, Avalanche, Base, and Polygon, and are integrated with DeFi protocols like Kamino Finance, Raydium, and Jupiter Exchange, supporting on-chain strategy deployments such as lending, market making, and arbitrage.

DigiFT analyst Ryan pointed out that the xStocks token is essentially a debt structure (corporate debt, tracking the underlying assets), not an equity token. The issuance of debt tracks the underlying assets, and the issuer does not need custodial qualifications, so the backed issuer is a special purpose vehicle (SPV), which does not have distribution qualifications. The xStock involves a Bermuda DA licensed entity PDSL, which is actually a subsidiary of Kraken, and is distributed through this entity.

Since it is debt, it involves dividends, and xStock directly airdrops tokens; the token does not involve corporate actions. Debt can be issued as bearer bonds, so it is essentially more like a stablecoin, belonging to corporate liabilities. More importantly, the transfer of debt ownership does not require registration (equity does), so there is no stamp duty involved (although this is a very convoluted tax category in traditional finance), allowing for any on-chain transfer.

Purchasing involves margin financing and stablecoin conversion, so there is a purchase limit per transaction. Additionally, traditional brokerages only support trading during business hours and blue ocean pre-market and after-hours trading. To compensate for market maker losses, the spread is set at 1%, and the fees are relatively high at 0.5%. In summary, it allows users to gain exposure to U.S. stocks without further utility, but currently, it is sufficient. If institutionalization is to occur in the future, other issuance structures and solutions will still be needed.

Trading Experience: Insufficient Liquidity and Participation Barriers

Despite support from Bybit and Kraken, the actual trading activity of xStocks remains highly concentrated, with only six underlying assets—NVDAx, MSTRx, TSLAx, CRCLx, SPYx, and AAPLx—showing significant trading volume. According to on-chain data provided by defioasis, on the first day of the product launch on June 30, 2025, the on-chain trading volume was $1.338 million, with 1,225 unique trading users and 2,510 transactions; on July 1, on-chain trading activity significantly increased, with a trading volume of $6.64 million, 6,565 new unique trading users, and 17,879 transactions. Trading was mainly concentrated in a few tokens such as TSLAx ($1.71 million), SPYx ($1.53 million), and CRCLx ($940,000), while most other underlying assets had very limited on-chain trading, with some pools having zero liquidity and transaction counts below 20, with slippage issues being common.

In addition to the on-chain path, xStocks can also be traded through internal matching on exchanges, with Bybit providing USDT-based trading pairs and Kraken supporting fiat currency-based trading methods, but stablecoin trading pairs have not yet been opened, and there is a minimum purchase amount limit. It is important to note that whether through on-chain trading or exchange trading, both currently face widespread liquidity issues, resulting in low transaction efficiency for users and limited market depth, with the overall trading experience still showing a significant gap compared to traditional contract-for-difference platforms.

Target Audience and Structural Advantages

The Backed model primarily serves non-U.S. users who find it difficult to access U.S. stocks through traditional brokerages, especially crypto-native users. Its advantages include: support for stablecoin payments and small transactions, no need for a U.S. stock account, 24/7 on-chain matching and settlement, real asset custody, and EU regulatory compliance.

Expansion Path: Derivatives and Tokenization of Unlisted Equity

Although xStocks provides infrastructure for on-chain U.S. stock investment, the liquidity bottleneck in the spot market still exists, making it difficult to form a scalable trading ecosystem. Therefore, the industry is beginning to focus on more trading-oriented derivatives paths, particularly stock perpetual contracts (stonk perps). Popular tech stocks exhibit high volatility, and combined with high leverage mechanisms, they can yield high volatile returns similar to altcoins, making them more attractive to crypto users. Such products do not require actual stock delivery and can rely on oracle prices and funding rate mechanisms to achieve pure on-chain trading, with a mature technical path suitable for priority deployment on decentralized platforms like Hypeliquid. Compared to the compliance barriers faced by centralized exchanges, decentralized derivatives platforms offer greater flexibility and experimental space.

Another noteworthy development direction is the tokenization of equity in unlisted companies. Compared to the traditional private placement market's lack of transparency and limited exit mechanisms, on-chain issuance of transferable equity tokens, combined with DAO governance, contract lock-up, and qualified investor thresholds, is expected to achieve an efficient and transparent early equity circulation structure, particularly suitable for high-market-attention star companies like OpenAI and SpaceX. However, this path still faces challenges such as regulatory uncertainty and complex issuance structures, and in the short term, it is more likely to exist in pilot or gray compliance forms.

Conclusion

xStocks provides a realistic path for compliant asset tokenization, with its on-chain structure, cross-chain deployment, and DeFi integration capabilities demonstrating strong product design capabilities. However, the liquidity constraints of the spot model and insufficient user expansion capabilities determine that it is difficult to independently support the growth curve of the tokenized stock market. In the future, breakthroughs around perpetual derivatives and early equity tokenization may become key nodes in driving the on-chain securities market from "tool-type products" to "trading-type assets."

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