In the traditional securities trading system, the publishing, trading, and settlement of stocks are highly dependent on intermediaries such as securities firms and registration agencies, resulting in cumbersome processes, limited liquidity, and significant cross-border barriers. The emergence of tokenized stocks has transformed traditional stocks into digital assets that can be traded on the chain through blockchain technology. With the characteristics of decentralized rights confirmation, programmable equity, and global circulation, it has reshaped the underlying logic of Capital Markets. How can this new type of financial instrument achieve the value leap of "stocks as tokens"? In which scenarios will it release the growth potential of the securities market?
Core concept: digital equity stake certificate circulating on the chain
Tokenized stocks are digital tokens published based on blockchain technology, representing ownership or income rights to traditional stocks. The core is to transform paper stocks into standardized digital assets through tokenization. Unlike traditional stocks that rely on centralized ledgers, their core features include:
- Decentralized ownership : Through smart contracts, stock shares are mapped to homogeneous tokens on the blockchain (such as ERC-20, ST-20 standards). Investors directly control assets through wallet private keys, and ownership records are permanently on the chain and cannot be tampered with. For example, a technology company publishes tokenized stocks on the blockchain, with each token corresponding to 1 share of Common Stock, and the transaction history can be traced in real time through the blockchain browser.
- Fragmentation and Liquidity Enhancement : Supports splitting single stocks into smaller units (such as 0.1 shares), reducing investment barriers. Investors can achieve 7x24-hour trading on decentralized exchanges (DEX), breaking through the time and geographical limitations of traditional markets. For example, through the HashKey Exchange platform, users can trade tokenized US and Hong Kong stocks at any time, achieving real-time asset circulation.
- Compliance and Equity Automation : Integrate KYC/AML modules to screen Accredited Investors, and automatically execute dividends, voting and other rights through smart contracts. For example, tokenized stock contracts can preset "5% of quarterly Net Profit as dividends", and the profits will be automatically distributed to the holders' addresses at maturity without human intervention.
Technical Architecture: Security Tokenization System Supported by Multi-layer Protocols
The Technology Implementation of Tokenized Stocks takes "compliance + efficiency" as the core, and builds a full-process digital architecture including publishing, trading, and settlement.
- Publishing layer: smart contracts and compliance standards
- Standardized protocol : Using security token protocols such as ST-20 and ERC-1400, clarify the equity attributes (such as voting rights and dividend ratios) and transfer restrictions (such as lock-in period and investor qualifications) of the tokens. For example, a Listed Company publishes tokenized stocks through the ERC-1400 protocol, setting a 3-year lock-up period for the founder's stock, while publicly traded stocks support instant trading.
- Asset Anchoring Mechanism : Real stocks and tokens are anchored 1:1 through custodian institutions (such as licensed securities firms), and smart contracts verify asset reserves in real-time to ensure the value mapping of "token is equity stake". [HashKey Exchange] In the tokenized stock publishing, blockchain regulatory sandbox technology is used to synchronously audit custodial accounts and on-chain data to ensure asset transparency and compliance.
- Transaction layer: Cross-chain interoperability and liquidity aggregation
- Multi-chain deployment : Tokenized stocks can be published on public chains such as Ethereum and Solana at the same time, and asset interoperability between different ecosystems can be achieved through cross-chain bridges (such as Polkadot's XCMP). For example, the tokenized stocks of a multinational enterprise are simultaneously launched on Ethereum and Binance Smart Chain, and investors can seamlessly trade on multiple platforms.
- Decentralized Trading : Relying on the Automated Market Maker (AMM) mechanism, tokenized stocks can form liquidity pools on DEXs such as Uniswap and SushiSwap, supporting real-time quotes and transactions. Compared with the T + 2 settlement cycle of traditional securities firms, on-chain trading realizes "transaction is settlement", and funds and equity are credited in seconds.
- Settlement layer: Smart contract-driven equity management
- Automated Equity Execution : Smart contracts preset the life cycle rules of stocks, such as automatically withdrawing funds from the publisher's account and distributing them proportionally when distributing dividends, and assigning corresponding weights based on holdings when voting. The tokenized stocks of a certain new energy vehicle company achieve "1 vote for every 10 tokens held" through the contract, and the voting results are counted in real-time on the chain.
- Compliance technology embedding : integrating biometric identification, digital signature and other technologies to complete investor identity authentication, ensuring compliance with regulatory requirements such as the Securities Law and the Financial Instruments Market Directive, and avoiding risks such as money laundering and market manipulation from a technical perspective.
Application Scenario: Efficiency Innovation in Global Capital Markets
The emergence of tokenized stocks is fundamentally reconstructing the participation paradigm of Financial Marekt.
- Breakthrough in the popularization of cross-border investment
Traditional cross-border stock investment is limited by foreign exchange controls and high thresholds, while tokenized stocks allow investors to directly purchase overseas assets through stablecoins (such as USDC). For example, South East Asia users can purchase Tesla tokenized stocks starting at $10 on [HashKey Exchange], with transaction costs reduced by 70% compared to traditional channels, and real-time settlement to avoid exchange rate fluctuations.
- The liquidity revolution of private equity stakes
Early-stage enterprises can publish private equity stakes through tokenization, and investors can transfer their shares on the compliance platform to solve the problem of "long lock-up period and difficult exit" of traditional private equity. A Web3 startup has split its 10% equity stake into 100,000 tokens, and Accredited Investors can trade on the secondary market on the chain. The investment cycle has been shortened from an average of 5 years to flexible exit.
- Strategy upgrade of institutional finance
Hedge funds and asset management institutions build cross-market strategies through tokenized stocks, such as simultaneously allocating US stocks and cryptocurrency tokenized assets, and using on-chain data to adjust positions in real time. A certain quantitative fund uses smart contracts to set "automatic reduction of holdings when the proportion of S & P 500 tokenized stocks exceeds 40%", which improves the efficiency of strategy execution by three times, and the entire transaction record can be audited.
Despite the broad prospects of tokenized stocks, their development still needs to overcome challenges such as unified regulatory frameworks (such as differences in the definition of "security tokens" among countries) and compatibility of technical standards (such as the security of cross-chain protocols). With the advancement of global compliance technology and the improvement of blockchain infrastructure, tokenized stocks are expected to become the core bridge connecting traditional finance and digital finance, promoting Capital Markets from "institutional dominance" to "decentralized inclusiveness", and enabling Asset Allocation and Value Investment to achieve more efficient circulation and distribution on the chain.