Seeing the tokenization of US stocks again, I miss that summer of 2020.

2025-07-01 11:10:51

In July, the scorching sun blazed, and the summer in the crypto circle welcomed the wave of tokenization in the US stock market.

Robinhood announced with great fanfare that European users can trade US stocks on the Arbitrum blockchain 24/7; xStocks has teamed up with Kraken and Solana to launch on-chain tokens for 60 popular US stocks, and Coinbase has also applied to the SEC to launch tokenized securities...

For a time, the tokenization of U.S. stocks became one of the few narrative corrects in the dull world of cryptocurrency, and this wave has taken over everyone's timeline.

But this is not the first time that U.S. stocks have undergone tokenization.

The dead memories begin to attack me again, making me reminisce about that summer five years ago.

In August 2020, the summer of DeFi swept through the crypto space like a blazing fire, the liquidity mining of Uniswap ignited frenzy, Terra's Luna chain and UST soared, and on-chain finance has actually made many innovations, including the tokenization of US stocks.

At that time, there was a protocol called Mirror on Luna, and I minted mAAPL (the token corresponding to Apple stocks) with a few dollars of UST on Terra Station, without KYC, without opening an account, for the first time bypassing brokers to touch the fluctuations of Apple's stock price.

But there is a line in a song that perfectly describes the feelings of the old investors after going through all this:

"You left noise in my life, but after you left, it was terrifyingly quiet."

Luna ultimately collapsed, and Mirror was also crushed by the SEC's lawsuit, shattering the dreams of 2020. Besides the transaction hash, there seems to be nothing that can prove that tokenization of US stocks existed as early as the summer of 5 years ago.

Now, xStocks and Robinhood are making a comeback, reigniting hope for on-chain U.S. stocks. Will this time be successful? How is it different from five years ago?

That summer, the free utopia of Mirror

If you no longer remember the Mirror Protocol, or if you weren't in the circle at the time, let me help you recall that distant memory.

The core idea of the Mirror Protocol is to use on-chain synthetic assets to track the stock prices of US stocks in the real world. This approach has also given rise to a type of asset called mAssets.

The so-called "synthetic assets" mAssets are tokens that simulate stock prices through smart contracts and oracle, where holders do not own the actual stocks, but instead act as "on-chain shadows" to track price fluctuations.

For example, mAAPL (Apple), mTSLA (Tesla), mSPY (S&P 500 ETF), they rely on Band Protocol's decentralized oracle to obtain real-time US stock data.

Although this is different from directly buying US stocks, it excels in convenience:

Minting mAssets is very simple. By over-collateralizing 150%-200% with the stablecoin UST on the Terra chain at that time, you can obtain the corresponding tokenized stocks through operations in Terra Station, without KYC, and the transaction fee is only about $0.1.

These tokens can not only be traded 24/7 on Terraswap (Terra's DEX at the time), as flexibly as token pairs on Uniswap; they can also be used as collateral in another lending protocol within their ecosystem, Anchor Protocol, for borrowing or earning interest.

Not only can one enjoy the growth benefits of U.S. listed companies, but also leverage the flexibility of on-chain finance. Five years ago, DeFi seemed to have figured out the tokenization of U.S. stocks.

But the good times didn't last long; that summer dream shattered unexpectedly.

In May 2022, a famous black swan event struck the cryptocurrency circle. Terra's algorithmic stablecoin UST depegged, Luna plummeted from $80 to just a few cents, mAssets were wiped out overnight, and Mirror nearly came to a halt.

To make matters worse, the U.S. SEC has intervened, accusing mAssets of being unregistered securities, and Terraform Labs and its founder Do Kwon are mired in legal troubles.

From "Hold on tight, mates" to "Sorry, we failed," the collapse of the Terra ecosystem has also made the tokenization of the US stock market vanish without a trace on-chain. While reflecting and reminiscing, you can also see its fatal weaknesses in reverse:

Synthetic assets heavily rely on oracles and the stability of UST, without any actual stock support. The collapse of the underlying will render the upper-level assets into a bubble. Moreover, while anonymous transactions attract users, they are bound to touch upon regulatory red lines; the regulations and policies at that time were far less liberal and lenient than today.

The fragility of synthetic assets, the risks of stablecoins, and the absence of regulation have led to a painful price for this experiment.

What's different this time?

Not succeeding at that time does not mean not succeeding now.

The summer of 2020 has passed, and this time Kraken, Robinhood, and Coinbase, with more mature technology and compliance posture, are trying to rewrite the story.

As an old player who witnessed the summer of DeFi, I can't help but compare: what is different this time compared to Mirror five years ago?

We may be able to look at it from three aspects: products, participants, and market environment.

Product: From On-Chain Shadow to Real Anchoring

As mentioned earlier, tokens like mAAPL and mTSLA are just "on-chain shadows" simulated by smart contracts, not holding actual stocks, but only simulating price fluctuations.

Now, xStocks has taken a different path. xStocks is custodied by regulated brokers, ensuring the redeemable cash value after purchasing stocks.

The process of tokenization of US stocks is managed by Backed Assets, a token issuer registered in Switzerland, responsible for purchasing and tokenizing assets.

It buys stocks such as Apple or Tesla through the IBKR Prime channel of Interactive Brokers (a professional brokerage service connecting to the US stock market), then transfers the assets to Clearstream (the custodian of Deutsche Börse) for isolated storage, ensuring that each Token corresponds 1:1 to the actual holdings and is subject to legal audits.

In short, every on-chain purchase you make is anchored by a real stock purchase.

(Image source: X user @_FORAB)

In addition, xStocks allows token holders to reverse redeem actual stocks through Backed Assets, a feature that enables it to escape the purely on-chain speculative framework of Mirror, connecting on-chain and off-chain.

Participants: From DeFi native to TradFi integration

The stage of Mirror belongs to native DeFi players. Retail investors and developers from the Terra community are the main force, and the heated discussions on Discord and Twitter have driven the popularity of mAssets. The success of Mirror is inseparable from the Luna and UST craze of the Terra ecosystem, and the experimental spirit of the community has made it shine like a comet.

This also makes one sigh, the era of adults has changed.

The recent tokenization of US stocks is mainly led by traditional financial giants and compliant companies within the industry.

For example, xStocks is provided by Kraken as a compliant platform, Robinhood brings traditional brokerage experience on-chain, and BlackRock's tokenization pilot further signifies institutional entry.

The DeFi ecosystem of Solana (such as Raydium and Jupiter) indeed adds vitality to xStocks, allowing retail investors to use tokens for liquidity mining or lending, retaining some DeFi genes.

But compared to Mirror's community-driven approach, xStocks feels more like a grand production directed by exchanges and TradFi giants: larger in scale, with less wildness.

Market and Regulatory Environment: From Gray Area to Compliance is King

The Mirror of 2020 was born in a regulatory gray area. During the summer of DeFi, compliance was almost disregarded, and anonymous transactions became the default rule of the community. In 2022, the SEC determined that mAssets were unregistered securities, and Terraform Labs was mired in lawsuits, with anonymity becoming a fatal flaw.

At that time, the market was still small, and DeFi was more like an experimental playground for a group of geeks.

The market and regulation in 2025 will be completely different. Projects like xStocks prioritize compliance, enforcing KYC/AML, and adhering to EU MiCA regulations and US securities laws.

After taking office in January 2025, the new SEC Chairman Paul Atkins referred to tokenization as the "digital revolution of finance," with loose policies also easing restrictions on innovation. In June 2025, Dinari obtained the first tokenized stock brokerage license in the U.S., further paving the way for Kraken and Coinbase.

The embrace of mainstream finance and changes in the market environment have allowed xStocks and Robinhood to avoid the legal pitfalls of Mirror in a compliant manner, but it also seems to have taken away the grassroots flavor that on-chain US stocks once had.

The Echoes of Summer

The crypto space has changed over the years, yet it seems like it hasn't changed at all.

Five years ago, the tokenization of US stocks in DeFi was like an unrefined carnival, full of passion but lacking stability. Today, five years later, encryption has donned the cloak of compliance, making the journey steadier, but also losing some of its casualness and rawness.