Backed xStocks Explained: On-Chain Experiments and Breakthrough Paths in Tokenized Equities

Jul 17, 2025

Author | WuBlockchain

(This article does not constitute any investment advice. Readers are advised to strictly comply with the laws and regulations of their jurisdiction and refrain from participating in any illegal financial activities.)

On June 30, 2025, crypto exchanges Bybit and Kraken announced the listing of xStocks, a product offered by Swiss-compliant asset tokenization platform Backed Finance. xStocks are a series of tokens backed 1:1 by real stocks, with the underlying assets held by regulated third-party custodians such as Swiss banks InCore Bank and Maerki Baumann. These tokens are issued on the Solana blockchain under the SPL standard, enabling 24/7 trading and instant on-chain settlement — removing the traditional limitations of stock markets in terms of time and geography. In compliance with regulatory requirements, xStocks are currently available only to non-U.S. persons; U.S. persons are prohibited from purchasing or holding these products. Shortly afterward, major platforms including Cryptocom and GMGN also launched support for xStocks.

Team Background

According to LinkedIn, all three co-founders of Backed Finance previously worked on the now-defunct DAOstack project. Data from ICO Drops shows that DAOstack raised nearly $30 million between Q4 2017 and May 2018 through private sales, pre-sales, and public fundraising rounds, with token prices ranging from $0.708 to $0.9423. Major investors included Cultu.re, Endor Protocol, Gnosis, and Menlo One. However, the price of DAOstack’s GEN token plummeted after May 2021 and eventually approached zero. DAOstack officially shut down at the end of 2022. This relatively negative team background has also sparked discussions within the community.

In 2021, inspired by the growing adoption of stablecoins, the three founders left DAOstack and established Backed Finance with the goal of bringing traditional assets such as stocks onto the blockchain in a compliant manner. Between 2021 and 2022, Backed completed feasibility validation and a seed funding round, while also establishing partnerships with custodial banks and broker-dealers. The prospectuses for its products received regulatory approval within the European Union. In 2023, the first batch of products was launched, with total issuance exceeding $50 million. In April 2024, Backed raised $9.5 million in a Series A round led by Gnosis, with participation from investors including Exor Seeds, Cyber Fund, and Mindset Ventures.

Product Suite and On-Chain Deployment

Backed Finance currently offers two main product lines — xStocks and bTokens — providing on-chain tokenized securities that cover global blue-chip stocks, index funds, and short-term bonds. All tokens are backed 1:1 by physical assets and are assigned ISIN codes approved under EU compliance standards. The products are issued across major blockchains including Ethereum, Solana, Avalanche, Base, and Polygon, and are integrated with DeFi protocols such as Kamino Finance, Raydium, and Jupiter Exchange, enabling on-chain strategies like lending, market making, and arbitrage.

According to DigiFT analyst Ryan, xStocks tokens are essentially structured as debt instruments (corporate debt) that track the underlying assets, rather than equity tokens. Since issuing debt to track underlying assets does not require custodial licensing, the issuer of Backed’s products is an SPV, which itself does not possess distribution qualifications. The distribution of xStocks involves an intermediary entity — PDSL, a Bermuda-based entity with a Digital Asset (DA) license — which is in fact a subsidiary of Kraken and serves as the distribution channel.

Because xStocks are structured as debt instruments, they involve interest distributions, which are handled via direct token airdrops. These tokens do not include corporate actions either. Since debt instruments can be issued as bearer bonds, xStocks in essence resemble stablecoins — they represent liabilities of the issuing entity. More importantly, the transfer of debt ownership does not require registration (unlike equity, which must be registered), which eliminates stamp duty in the transfer process — a tax still common, though often criticized, in traditional finance. As a result, xStocks can be freely transferred on-chain without restrictions.

Purchasing xStocks involves pre-funding and stablecoin conversion, so there is a cap on single-purchase amounts. Moreover, since traditional brokers only operate during regular U.S. market hours (including Blue Ocean pre-market and after-hours sessions), market makers may face losses during off-hours. To compensate for this, the spread is set at 1%, and transaction fees are relatively high at 0.5%. All things considered, xStocks offer users basic exposure to U.S. equities, though no additional rights. For now, the solution is sufficient for retail use — but further institutional adoption would require new issuance structures and frameworks.

Trading Experience: Low Liquidity and Participation Barriers

Despite receiving support from Bybit and Kraken, actual trading activity for xStocks remains highly concentrated. Only six tickers — NVDAx, MSTRx, TSLAx, CRCLx, SPYx, and AAPLx — have shown noticeable trading volumes. According to on-chain data provided by @defioasis, on the product launch day of June 30, 2025, the total on-chain trading volume reached $1.338 million, with 1,225 unique traders and 2,510 transactions. On July 1, on-chain trading activity increased significantly, with a daily trading volume of $6.64 million, 6,565 new unique traders, and 17,879 transactions.

However, trading was primarily concentrated in a few tokens, including TSLAx ($1.71 million), SPYx ($1.53 million), and CRCLx ($940,000). Most other tokens saw extremely limited activity on-chain, with some liquidity pools having zero liquidity and fewer than 20 trades, leading to widespread slippage issues.

In addition to on-chain routes, xStocks can also be traded through internal order books on exchanges. Bybit offers USDT-based trading pairs, while Kraken supports fiat-based transactions, though it has not yet enabled stablecoin trading pairs and imposes a minimum purchase amount. It is worth noting that both on-chain trading and exchange-based trading currently suffer from insufficient liquidity, resulting in low order execution efficiency and shallow market depth. Overall, the trading experience still falls short when compared to that of traditional CFD (Contract for Difference) platforms.

Target Users and Structural Advantages

The Backed model primarily serves non-U.S. users who face barriers accessing U.S. equities through traditional brokerages — particularly crypto-native users. Its advantages include: support for stablecoin payments and low-volume transactions, no requirement for a U.S. brokerage account, 24/7 on-chain matching and settlement, custody of real-world assets, and compliance with EU regulatory standards.

Expansion Pathways: Derivatives and Tokenization of Private Equity

While xStocks provide foundational infrastructure for on-chain U.S. equity exposure, the spot market continues to face significant liquidity constraints, making it difficult to build a scalable trading ecosystem. As a result, industry attention is shifting toward derivative-based approaches with stronger trading attributes — particularly perpetual stock contracts (stonk perps). Popular tech stocks exhibit high volatility, and when combined with leverage mechanisms, can deliver altcoin-like high-yield fluctuations that are more appealing to crypto users.

These products do not require actual stock settlement and can instead rely on oracle pricing and funding rate mechanisms to enable fully on-chain trading. The technical architecture is already mature and well-suited for early deployment on decentralized platforms such as Hyperliquid. Compared to the regulatory hurdles faced by centralized exchanges, decentralized derivatives platforms offer greater flexibility and room for experimentation.

Another noteworthy development direction is the tokenization of equity in private (unlisted) companies. Compared to traditional private markets — often characterized by opaque information and limited exit options — on-chain issuance of transferable equity tokens, combined with mechanisms such as DAO governance, smart contract-based vesting, and qualified investor thresholds, holds the potential to enable a more efficient and transparent structure for early-stage equity circulation. This model is particularly suitable for high-profile companies with strong market interest, such as OpenAI and SpaceX.

However, this path still faces challenges, including regulatory uncertainty and complex issuance structures. In the near term, such offerings are more likely to exist in pilot programs or within regulatory grey zones.

Conclusion

xStocks offer a practical path toward compliant asset tokenization, with its on-chain architecture, cross-chain deployment, and DeFi integration demonstrating strong product design capabilities. However, the liquidity limitations of the spot trading model and its limited user scalability suggest that xStocks alone may not be sufficient to drive the growth trajectory of the tokenized equities market.

Looking ahead, breakthroughs that combine perpetual derivatives with the tokenization of early-stage equity may be the key to transforming on-chain securities from mere “utility products” into fully “tradeable assets.”

Wu Blockchain

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