De-Regulatory Policies Drive the RWA Narrative of U.S. Stocks: Opportunities and Challenges for Tokenized Stocks

Author: @Web3 _Mario

Abstract: As Trump's policies are being fulfilled one by one, attracting manufacturing to return through tariffs, actively detonating the stock market bubble and forcing the Federal Reserve to cut interest rates and release water, and then promoting financial innovation and accelerating industrial development through de-regulatory policies, this combination is really changing the market. Among them, the RWA track under the favourable de-regulatory policy has also attracted increasing attention from the crypto industry. This article focuses on the opportunities and challenges of tokenised stocks.

A review of the history of the development of tokenised stocksIn

fact, tokenised stocks are not a new concept, starting in 2017, Attempts at STOs have already begun, the so-called STO (Security Token Offering is a financing method in the field of cryptocurrency, the essence of which is to digitise and upload the rights and interests of traditional financial securities to the chain, and realise the tokenization of assets through blockchain technology. It combines the compliance of traditional securities with the efficiency of blockchain technology. As an important security class, tokenised stocks are the most interesting application scenario in the STO space.

Before the advent of STOs, the mainstream financing method in the blockchain space was ICO ( Initial Coin Offering). The rapid rise of ICOs mainly relies on the convenience of Ethereum smart contracts, but the tokens issued by most projects do not represent real asset rights and interests, and there is a lack of supervision, resulting in frequent fraud and runaways.

In 2017, the US SEC (Securities and Exchange Commission) targeted DAOs The incident issued a statement stating that certain tokens may be securities and should be regulated under the Securities Act of 1933. This was the starting point for the official germination of the STO concept. In 2018, STO was introduced as a kind of "compliant ICO"The concept gradually became popular and began to attract attention from the industry. However, due to the lack of unified standards, poor liquidity in the secondary market, and high compliance costs, the market has developed slowly.

With the advent of DeFi Summer 2020, Some projects are starting to try to create derivatives pegged to the stock price through smart contracts through decentralised solutions, so that on-chain investors do not need to be based on complex KYC processes , you can invest directly in the traditional stock market. This paradigm, often referred to as the synthetic asset model, does not directly own U.S. stocks, and does not require trust in a centralised authority for trading, bypassing expensive regulatory and legal costs. Representative projects include Synthetix and Mirror Protocol in the Terra ecosystem 。

In these projects, market makers can mint on-chain synthetic U.S. stocks and provide market liquidity by providing excess cryptocurrency collateral, and traders can directly access the DEXThe secondary market trades these underlyings to gain price exposure to the anchored stock. I still remember that the stock in the U.S. stock market at that time was still Tesla, not Nvidia in the previous cycle. Therefore, most of the project slogan has played the selling point of trading TSLA directly on-chain.

However, judging from the final market development, the trading volume of synthetic US stocks on the chain has been unsatisfactory. Taking sTSLA on Synthetix as an example, counting the minting and redemption of the primary market, its total cumulative on-chainThere are only 798 transactions. Later, most of the projects claimed that due to regulatory considerations, they would remove the synthetic assets of the U.S. stock market and turn to other business scenarios, but the essential reason is likely to be that the PMF was not found It is impossible to establish a sustainable business model, because the premise of the establishment of the business logic of synthetic assets is that there is a large demand for on-chain transactions, attracting market makers to mint assets through the primary market and earn fees for market making in the secondary market, and if there is no such demand, market makers will not only be unable to obtain income through synthetic assets, but also have to bear the risk exposure brought by synthetic assets and short anchoring U.S. stocks, so liquidity will further shrink.

In addition to the synthetic asset model, some well-known CEXs are also experimenting with centralised custody models, forCrypto traders bring the ability to trade U.S. stocks. This model is hosted by a third-party financial institution or exchange with the actual stock on the CEXdirectly creates tradable undertaking. The more typical ones are FTX and Binance. FTX in October 2020 month Launched a tokenised stock trading service on the 29th, with German financial company CM-Equity AG and Switzerland's Digital Assets AG has partnered to allow users in non-US and restricted regions to trade tokens linked to shares of publicly traded US companies, such as Facebook and Netflix , Tesla, Amazon, etc. April 2021, BinanceIt has also started to offer tokenised stock trading services, and the first stock to go live is Tesla (TSLA)。

However, the regulatory environment at the time was not particularly friendly, and the core sponsor was CEX, which meant that there was direct competition with traditional stock trading platforms, for exampleNasdaqand so on, naturally under a lot of pressure. FTX saw an all-time high in tokenised stock trading volume in Q4 2021. Of these, the trading volume in October 2021 was 9,400$10,000, but its tokenised stock trading service was discontinued after its bankruptcy in November 2022. Binance, on the other hand, launched the business in 2021 just three months after it was launched, also due to regulatory pressure7Announced the end of tokenised stock trading services in January.

Since then, as the market has entered a bear market, the development of the track has also come to a standstill. It wasn't until Trump's election that his de-regulated financial policies brought about a shift in the regulatory environment and renewed the market's focus on tokenised stocks, but at this time it had a new name, RWA. This paradigm emphasises the introduction of compliant issuers to issue tokens 1:1 guaranteed by real-world assets on-chain through compliant architecture design, and the creation, trading, redemption, and management of collateral assets are strictly implemented in accordance with regulatory requirements.

The current market status of the stock RWA

, so let's introduce the current stockThe current state of the RWA market. Overall, the market is still in its early stages and is still dominated by US equities. According to RWA.xyz data, the total issuance of the current stock RWA market has reached: $445.40M, but it's worth noting that $429 of it The circulation of 84M is to be attributed to an underlying EXOD, which is the Exodus Movement, Inc.Issued on-chain shares, a software company focused on developing self-custodial cryptocurrency wallets, the company was founded in 2015 and is headquartered in Nebraska, USA. The company's shares are listed on the New York Stock Exchange (NYSE America) and allow users to migrate their common Class A shares toManaged on the Algorand blockchain, users can directly view the price of these on-chain assets in the Exodus Wallet, and the company's total market capitalisation is currently$1.5B。