The good and bad of tokenized stocks

Key Points

1. Tokenized stocks (xStocks) enable 24/7 trading and instant settlement on blockchains like Solana, but only qualified, KYC’d, non-US Kraken investors can mint/redeem them via a Liechtenstein SPV.

2. Price peg drift occurs during off-hours (e.g., weekends) when primary-market arbitrage is inactive, forcing market makers to quote wide spreads and small sizes due to unhedgeable risk.

3. Liquidity challenges undermine tokenized equities' value proposition, with synthetic perps (e.g., Ostium on Arbitrum) offering cheaper delta exposure but lower capital efficiency.

4. Robinhood’s tokenized stock contracts include KYC/AML checks that restrict transfers to approved addresses, limiting composability.

5. Market makers like Wintermute’s CEO acknowledge reluctance to provide liquidity on AMMs, especially during weekends, exacerbating the liquidity issue.