In a significant development for the integration of traditional finance with the blockchain ecosystem, Kraken, a prominent cryptocurrency exchange, has partnered with Swiss tokenization firm Backed to launch xStocks on the Ethereum network. The initiative aims to facilitate the seamless inclusion of tokenized equities within the decentralized finance (DeFi) infrastructure. This move allows eligible Kraken clients to deposit and withdraw xStocks directly on Ethereum, where they will be represented as ERC-20 tokens fully collateralized at a one-to-one ratio by the underlying equities.
This innovation offers investors the ability to easily transfer tokenized stocks and ETFs between Kraken and self-custodial wallets, thus enabling access to various Ethereum-based DeFi protocols. The Ethereum introduction follows previous xStocks launches on other blockchain networks, including Solana, BNB Chain, and TRON. Since its launch in June, xStocks has amassed an impressive trading volume exceeding $3.5 billion across both centralized and decentralized exchanges.
The decision to expand to Ethereum, the largest smart contract platform, equips xStocks with immediate access to a vast network of decentralized applications (dApps). Kraken co-CEO Arjun Sethi emphasized the importance of a multi-chain strategy in ensuring accessibility and portability of tokenized equities across different ecosystems. “It ensures tokenized equities are accessible across ecosystems, portable between wallets and protocols, and composable within the applications users already trust. Ethereum is the next logical step,” he stated.
This rollout comes amid growing interest in the tokenization of traditional financial instruments, including equities, onto blockchain systems. Other crypto exchanges, such as Gemini and Robinhood, have also begun to offer tokenized U.S. stocks to users in the European Union. However, the expansion of tokenized equity offerings has not been without concern, particularly regarding issues such as limited shareholder rights and the complexities of fragmented regulatory environments.
As xStocks continues to evolve, the partnership between Kraken and Backed marks a notable step towards integrating conventional finance with the burgeoning DeFi landscape, although challenges remain to be addressed in the regulatory and operational aspects of tokenized assets.
