Robinhood

Galaxy

Tesla

<p><strong>Crypto is supposed to be about freedom permissionless networks, immutable ownership, assets that no government or intermediary can arbitrarily revoke. At least, that was Satoshis dream a vision that has admittedly faded over time as reality butted in.</strong></p>
<figure class="wp-block-image alignright size-full is-resized">
 <img width="353" height="353" src="https://s3.magazine.cointelegraph.com/magazine/wp-content/uploads/2025/09/Tesla-token.jpg" alt="Tesla" style="width: 100%;height:auto">
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  <em>Tesla logo. (Tesla)</em>
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<p>Amid all the other dying idealism, along came stock tokens, shiny digital wrappers for traditional equities such as Tesla, Apple and Amazon. Suddenly, the crypto space found itself dressed up in Wall Streets regulatory straitjacket.</p>
<p>Stock tokens, as currently structured, such as Kraken’s, Robinhood’s and in the future, Coinbase’s are about as decentralized as a Goldman Sachs board meeting. Theyre digital and tokenized, but users must pass KYC to acquire them; they can only move between whitelisted addresses, and issuers can freeze or revoke them at will. In short, they arent really crypto at all. Theyre securities in a digital costume, playing fancy dress at a DeFi masquerade.</p>
<p>So the question is: how to move from this awkward halfway house of centralized tokenization to a future where owning a tokenized Tesla share feels as free as holding ETH or BTC? And perhaps the harder question: Is that future even possible?</p>
<h2 class="wp-block-heading" id="what-is-tokenization-anyway">What is tokenization anyway?</h2>
<p>When people talk about stock tokens, they often blur very different instruments: tokenized public equities, tokenized Treasurys and even tokenized private company shares. In reality, they all fall under the category of security tokens: financial instruments that live on blockchain rails but remain bound by securities law.</p>
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 <img width="562" height="320" src="https://s3.magazine.cointelegraph.com/magazine/wp-content/uploads/2025/09/Robinhood-Vlad.jpg" alt="Robinhood" style="width: 100%;height:auto">
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  <em>Robinhood has embraced stock tokenization in Europe.</em>
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<p>Ross Shem, co-founder and chief operating officer at tokenization company Stobox, doesnt pull his punches.</p>
<p>Trying to treat tokenized securities such as native crypto assets is naive and dangerous, he says. These tokens are bound by securities laws, require KYC and must respect investor protection standards. The only thing they share with crypto is the underlying technology, not the ethos, not the regulation, not the culture.</p>
<p>For Shem, decentralization is the wrong framing. True decentralization, in the crypto sense, is incompatible with regulated financial instruments. You can use zero-knowledge proofs or smart contracts for automation and privacy, but you cannot opt out of the rules. Security tokens will not become more crypto. On the contrary, traditional finance will become more blockchain.</p>
<h2 class="wp-block-heading" id="strong-are-tokenized-equities-just-digital-ious-strong"><strong>Are tokenized equities just digital IOUs?</strong></h2>
<p>That distinction matters because todays stock tokens are essentially IOUs. Centralized issuers must obey securities law, which means embedding restrictions such as KYC, whitelist-only transfers and revocable contracts. Its decentralized theater dressed up as innovation.</p>
<p>Wrapping equities into tokens without decentralization just recreates the old system with shinier rails, says Darren Franceschini, CEO and co-founder of Zekret Labs.</p>
<p>To make stock tokens truly crypto, you need decentralized custody and compliance checks enforced at the protocol layer, not blind trust in a single issuer. Only then could tokenized equities inherit blockchains core guarantees of transparency and censorship-resistance, he adds.</p>
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<h2 class="wp-block-heading" id="strong-ai-defi-and-genuine-decentralization-of-stock-tokens-strong"><strong>AI, DeFi and genuine decentralization of stock tokens</strong></h2>
<p>So, what would a genuinely decentralized Tesla token look like? It would move permissionlessly, be immutable once in a wallet, plug seamlessly into DeFi protocols and resist censorship by regulators or issuers.</p>
<p>In other words, it would behave like Bitcoin: ownership absolute, control resting solely with the holder.</p>
<p>As is the nature of RWAs (real-world assets) like stocks, the question here really shouldnt be how can they be decentralized, but whether the asset is permissionlessly usable, composable and integratable across the decentralized ecosystem, says Danish Chaudhry, general partner at Paper Ventures. If an asset can move freely wallet-to-wallet and plug into DeFi without asking anyones permission, its crypto. If it cant, its just a digital wrapper.</p>
<figure class="wp-block-image aligncenter size-full is-resized">
 <img width="566" height="306" src="https://s3.magazine.cointelegraph.com/magazine/wp-content/uploads/2025/09/Robots.jpg" alt="AI" style="width: 100%;height:auto">
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  <em>Perhaps AI can ensure stock tokens are decentralized.</em>
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<p>While this is possible, but difficult, with existing systems, Shashank Sripada, co-founder of Gaia AI, believes that artificial intelligence could well be the missing ingredient.<br><br>His company recently launched its <strong><a href="https://cointelegraph.com/news/web3-gaia-hardware-crypto-phones-consoles" target="_blank" rel="noopener noreferrer nofollow">AI smartphone</a></strong> for users in South Korea and Hong Kong, which runs AI models directly on the phone, letting users interact with agents without relying on cloud services.</p>
<p>The real opportunity lies in decentralized AI agents acting as compliance layers themselves, automating KYC, monitoring flows and surfacing alerts transparently onchain, Sripada says.<br><br>That flips regulation from a political choke point into a protocol feature. Its self-regulation by code, not decree, and much closer to the culture crypto was built on.</p>
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<h2 class="wp-block-heading" id="stock-tokenization-likely-to-be-on-a-spectrum-of-decentralization">Stock tokenization likely to be on a spectrum of decentralization</h2>
<p>Of course, decentralization isnt binary. Its a spectrum, and todays stock tokens sit firmly at the heavily centralized end. Over time, however, issuers could relax restrictions, regulators might trial sandboxes, and hybrid approaches may emerge.</p>
<p>The biggest roadblock is legal. Equities are among the most tightly regulated instruments worldwide, and most jurisdictions mandate centralized issuance. Any attempt to launch fully permissionless Tesla tokens today would be dead on arrival with regulators.</p>
<p>Unless stocks are directly issued by public companies onchain where the holders have direct rights to dividends, etc., they can never be truly decentralized since the middlemen issuers control the underlying, adds Chaudhry.</p>
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 <img width="598" height="776" src="https://s3.magazine.cointelegraph.com/magazine/wp-content/uploads/2025/09/Mike-in-washington-in-2023.jpg" alt="Mike Novogratz" style="width: 100%;height:auto">
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  <em>Galaxy Digitals Mike Novogratz in Washington, D.C. for a spot of lobbying in 2023. (<a href="https://x.com/novogratz/status/1707389378610319783" target="_blank" rel="noopener noreferrer nofollow">Novogratz, X</a>)</em>
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<p>This is the paradox: The very features that make crypto valuable permissionlessness, immutability, censorship resistance are the ones regulators will not allow for equities. Until laws adapt, decentralized stock tokens remain technically possible but legally blocked.<br><br>That said, things are changing fast. Earlier this month, Galaxy Digital became the first Nasdaq-listed company <strong><a href="https://cointelegraph.com/news/galaxy-digital-stock-tokenized-solana" target="_blank" rel="noopener noreferrer nofollow">to tokenize its shares</a></strong> directly on the Solana blockchain. Unlike derivatives or wrappers, each token carries the full legal and economic rights of shareholders.</p>
<p>Nasdaq itself this week <a href="https://x.com/NateGeraci/status/1965045458088370511" target="_blank" rel="noopener noreferrer nofollow">filed for a rule change</a> with the SEC to allow it to offer tokenized shares with the same legal and economic rights as any other share.</p>
<h2 class="wp-block-heading" id="strong-synthetic-stock-tokens-and-liquidity-problems-strong"><strong>Synthetic stock tokens and liquidity problems</strong></h2>
<p>Crypto has never been famous for respecting legal boundaries. Instead of tokenizing Tesla shares directly, DeFi protocols such as Synthetix and Mirror have experimented in the past with minting synthetic assets pegged to Teslas price. These dont grant ownership or dividends but do provide exposure and theyre permissionless.</p>
<p>Yet even synthetic markets face hurdles. Liquidity is one. The sTSLA token saw a grand total of 798 transactions before being phased out in 2021.<br><br>James Bernard, partner at<strong> </strong>Aava, explains why tokenized commodities and, by extension, tokenized equities have tended to lag behind other RWA categories. Unlike real estate deeds or treasury bills, commodities require reliable custody, storage and verification, which adds complexity and cost. Another major challenge is liquidity, he says.&nbsp;<br><br>Traditional commodity markets benefit from deep futures and derivatives ecosystems, while tokenized versions lack comparable market depth. Until platforms solve custody, compliance and liquidity hurdles and attract not just retail but also institutional and industrial players commodities will continue to lag other asset classes in tokenization adoption.</p>
<p>The same applies to equities; without deep secondary markets, tokenization risks remaining a niche experiment.</p>
<p>Liquidity is further impacted by having multiple issuers putting out competing Tesla tokens and dividing the amount of funds between smaller and smaller pools.</p>
<h2 class="wp-block-heading" id="strong-the-legal-issues-with-stock-tokenization-strong"><strong>The legal issues with stock tokenization</strong></h2>
<p><strong><a href="https://cointelegraph.com/magazine/robinhoods-tokenized-shares-poked-the-legal-hornets-nest/" target="_blank" rel="noopener noreferrer nofollow">For lawyers, the debate reveals fundamental tensions</a></strong> in what ownership even means. Gunnercooke, one of the largest global Web3 full-service companies, claims to have been directly involved in drafting around 3% of global crypto regulation.</p>
<p>James Burnie, partner at Gunnercooke, explains:</p>
<p>The issue for tokenizing stocks is that the underlying asset, the equity, is intrinsically centralized, and there are often specific provisions who can own the equity in a company. Even in models such as in the UAE, in which the token is equity, the regulator has required that the owner be identified, which effectively brings a centralizing element.</p>
<figure class="wp-block-image aligncenter size-full">
 <a target="_blank" href="https://cointelegraph.com/magazine/robinhoods-tokenized-shares-poked-the-legal-hornets-nest/" rel="noopener noreferrer nofollow"><img width="1015" height="320" src="https://s3.magazine.cointelegraph.com/magazine/wp-content/uploads/2025/09/Robinhood.jpg" alt="Law and stock tokenization"></a>
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  <em>Magazines legal panel explored the issues around stock tokenization.</em>
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</figure>
<p>He suggests that whats being decentralized isnt ownership itself but specific rights, such as claims to dividends. Yet that raises deeper questions: What exactly is it that the holder gets with tokenized equity? Simply owning a share token does not mean you own the company, nor is it an intrinsic right to a dividend.</p>
<p>Timo Lehes, co-founder of Swarm a licensed trading platform for tokenized RWAs echoes this approach:</p>
<p>Not all tokenization is created equal. Investors should always understand how an asset is being brought onchain and what rights they hold. For example, if the issuing company goes bankrupt, what happens to tokenholders?<br><br>So, while stock tokens from centralized issuers will never be purely decentralized, they can be designed in a way that fuses the best of both worlds: the safeguards of regulated markets and the efficiencies and freedoms of DeFi.</p>
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<h2 class="wp-block-heading" id="strong-will-wall-street-become-more-crypto-or-vice-versa-strong"><strong>Will Wall Street become more crypto, or vice versa?</strong></h2>
<p>The collision between Wall Street and Web3 is inevitable. Tokenization is not a passing fad; its the next chapter in capital markets. But stock tokens today are transitional, not transformational shinier versions of brokerage IOUs rather than crypto-native assets.</p>
<p>The breakthrough will come when three forces align: regulatory frameworks that accept blockchain as a native settlement layer, hybrid structures that protect investors without neutering composability and cryptographic advances that make compliance and privacy compatible. Only then will stock tokens cross the line from digital wrappers to genuinely decentralized assets.</p>

Can Robinhood or Kraken’s tokenized stocks ever be truly decentralized?

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Cointelegraph

Other articles published on Sep 10, 2025

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