On-chain Stock and STO: An Unspoken Narrative
Original Article Title: "US Stock On-chain and STO: A Hidden Narrative"
Original Article Author: Alex Xu, Mint Ventures
Narrative Background
Just a few days ago, Coinbase's CEO Brian Armstrong and CFO Alesia Haas both expressed consideration for tokenizing Coinbase's stock to enable trading of US stocks on the Base blockchain.
In this innovation-starved, PvP-centric crypto cycle, we finally see a glimmer of something interesting.
If successful, US stocks would become the third-largest category of RWA assets after stablecoins (USDT, USDC) and government bonds (Buidl). If the regulatory and compliance framework is clear and provides enough freedom for US stock tokens, US stock tokenized assets should have the potential to surpass the current scale of bondization tokens in the short term, as they offer the higher volatility and speculative nature that crypto users prefer.
Business Logic
Compared to narratives such as Crypto AI agents and descis (decentralized scientific research) that have emerged in this cycle, the value proposition of on-chain US stocks is clear, with the demands of both supply and demand being evident. Specifically:
The value proposition of on-chain US stocks is similar to other Defi products, reflected in a larger free market and superior composability:
1. Expanded the Scale of the Trading Market: Provided a 24/7, borderless, permissionless trading venue for US stock trading, which is something that neither Nasdaq nor NYSE can currently achieve (although Nasdaq has applied for 24-hour trading, but the expected implementation is not until the second half of 2026)
2. Superior Composability: By integrating with existing Defi infrastructure, US stock assets can be used as collateral, margin, to build indices and fund products, creating many unimaginable possibilities.
The demands of both supply and demand are also clear:
· Supply Side (US Stock Listed Companies): Reached potential investors from around the world through a borderless blockchain platform, gaining more potential buying interest.
· Demand Side (Investors): Many investors who were previously unable to directly trade US stocks for various reasons can now directly allocate and speculate on US stock assets through the blockchain.
In fact, the idea of bringing US stocks onto the blockchain has been attempted before. For example, Coinbase actually attempted to go public by issuing a security token (representing its stock $COIN) back in 2020, but it was put on hold due to regulatory hurdles from the US SEC.
In the previous DeFi craze, we also saw synthetic assets of US stocks in projects like Terra's Mirror and Ethereum's Synthetix. However, these endeavors gradually faded away due to regulatory concerns from the SEC.
Further back, the security token issuance project Polymath, founded and funded in 2017, promoted the concept of STO (Security Token Offering). This involved companies issuing tokens on the blockchain representing equity rights, allowing investors to obtain rights similar to traditional financial instruments such as stocks and bonds (e.g., dividends, voting rights). At that time, it also received considerable market attention.
Today, the resurgence of the STO concept and the feasibility of bringing US stocks onto the blockchain are mainly driven by a substantive shift in the SEC's attitude post-transition. It has moved from a past stance of strict regulation to supporting innovation within a compliance framework.
Within reach, STOs may be one of the few impactful narratives in this cycle with solid business logic and high potential.
Related Assets
From the narrative background and logic, we can examine the assets related to the crypto secondary market.
In reality, there are not many well-established STO concept projects that have issued tokens and gone live.
The most relevant may be Polymath, founded in 2017, which was an early proponent of STO concepts in the crypto industry. It later launched Polymesh, a blockchain specifically designed for compliant assets (such as security tokens), featuring built-in identity verification, compliance checks, privacy protection, governance, and instant settlement functionalities.
Polymesh has a good reputation in the industry. For example, BlackRock issued a $500 million digital bond on Polymesh last November, and real estate giant CBRE issued real estate tokenized shares based on it.
Polymesh's token is listed on Binance, named Polyx, with a current Market Cap and Fully Diluted Valuation both exceeding $100 million but not significantly high.
Furthermore, projects such as Ondo and other Real World Asset (RWA) concepts, while in the past have mainly focused on the tokenization of government bonds, their products can also be adjusted to comply with regulations to serve the tokenization of stocks. Additionally, Ondo has close ties to the Trump family, which may provide more overt or covert facilitation, including the possibility of appearances by Trump family members (although the marginal impact of such actions has been decreasing).
Chainlink has previously worked extensively to connect numerous traditional financial institutions with blockchains. As a leading oracle solution and security tokenization service provider, it theoretically stands to benefit from this.
Risks to Consider
The reason this article's title uses "Hidden but Emerging" to describe this wave of STOs is because there is still much uncertainty about whether it can gain momentum. Despite various actions taken by the current SEC administration (such as dismissing numerous crypto lawsuits) suggesting a more relaxed stance toward STOs, the unknown factor remains the timing of a clear compliance framework for guiding STOs. This needs to be closely monitored as it will determine the speed at which companies like Coinbase will follow through and progress.
A recent notable event was the SEC's first roundtable meeting of its cryptocurrency working group on the 21st of this month. The roundtable was specifically designed to establish a clear regulatory framework, with the theme of the first meeting being "Defining Securities Status: History and Future Path." One of the agenda items for the meeting was the design of a compliance path.
Of particular note, one of the keynote speakers at this event was Paul Grewal, Chief Legal Officer of Coinbase, a key player in the emerging STO narrative.
If the compliance framework related to STOs takes too long to materialize and the waiting period is prolonged, the current undercurrent narrative may lose momentum or even fade away.
Disclaimer: The information shared on this channel, as well as the author's commentary on the information, may contain factual and opinion errors, and is for reference only. Feel free to engage in discussions and provide corrections through comments.
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