Once again, I see the tokenization of U.S. stocks, I miss that summer of 2020.

2025-07-02 01:54:09

Written by: Deep Tide TechFlow

In July, the sun blazed, and the summer in the crypto circle welcomed the heat 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 while, the tokenization of US stocks has become one of the few correct narratives in the dull crypto space, and this trend has taken over everyone's timeline.

But this is not the first time for the tokenization of US stocks.

The memories of the dead 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, with Uniswap's liquidity mining igniting a frenzy, Terra's Luna chain and UST soaring, and on-chain finance actually making many innovations, including the tokenization of U.S. stocks.

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

But there is a lyric that perfectly describes the feelings of the old chives after going through all this:

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

Luna finally collapsed, and Mirror was crushed by the SEC's lawsuit, shattering the dreams of 2020. Apart from the transaction hashes, it seems that nothing can prove that tokenized US stocks already existed five summers ago.

Today, xStocks and Robinhood are making a comeback, reigniting hope for on-chain US stocks. Will this time be successful? How are things different compared to five years ago?

That summer, the free utopia of Mirror.

If you no longer remember the Mirror Protocol, or if you weren't involved at that time, let me help you regain some distant memories.

The core idea of the Mirror Protocol is to use on-chain synthetic assets to track the stock prices of U.S. stocks in the real world. This mechanism 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 mechanisms. Holders do not own actual stocks but instead act as a "shadow on the chain" to track price fluctuations.

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

Although this differs from directly buying US stocks, it is convenient:

Minting mAssets is very simple. You can over-collateralize 150%-200% with the stablecoin UST on the Terra chain, and operate in Terra Station to obtain the corresponding tokenized stocks, without KYC, with transaction fees of only about 0.1 dollars.

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

Not only can one enjoy the growth returns of U.S. listed companies, but also take advantage of the flexibility of on-chain finance. It seems that DeFi from five years ago has already figured out how to tokenize U.S. stocks.

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

In May 2022, a famous black swan event hit the crypto space. The algorithmic stablecoin UST of Terra decoupled, 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 along with its founder Do Kwon is mired in legal troubles.

From "Hold on tight, partners" to "Sorry, we failed," the collapse of the Terra ecosystem has also caused the tokenization of US stocks to vanish without a trace on-chain. While feeling nostalgic and reflective, you can also see its fatal weakness in reverse:

Synthetic assets heavily rely on oracles and the stability of UST, lacking any actual stock support. The collapse of the underlying will render the upper assets as mere illusions. Furthermore, while anonymous transactions attract users, they inevitably cross regulatory red lines; the regulations and policies at that time were far from as open and lenient as today.

The fragility of synthetic assets, the risks of stablecoins, and the lack of regulation have resulted in 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, armed with more mature technology and compliance posture, are trying to rewrite the story.

As an old player who has witnessed the summer of DeFi, I can't help but compare: what exactly 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 Anchor

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

The current xStocks, on the other hand, has taken a different path. xStocks is custodied by regulated brokers to ensure the redeemable cash value after purchasing stocks.

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

It buys stocks such as Apple or Tesla through Interactive Brokers' IBKR Prime channel (a professional brokerage service connecting 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 with the actual holdings and is subject to legal audits.

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

(Image source: X user @_FORAB)

In addition, xStocks allows token holders to redeem actual stocks through Backed Assets, a feature that lets it break away from Mirror's purely on-chain speculative framework, connecting on-chain with off-chain.

Participants: From DeFi native to TradFi integration

The stage of Mirror belongs to DeFi native 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 boom of the Terra ecosystem, and the experimental spirit of the community has made it shine like a comet.

This also makes one sigh, the adult era has changed.

The wave of tokenization in the US stock market is mainly led by traditional financial giants and compliant enterprises within the industry.

For example, xStocks is a compliant platform provided by Kraken, 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 resembles a grand production directed by exchanges and TradFi giants: larger in scale, with less wildness.

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

The Mirror of 2020 was born in a gray area of regulation. During the summer of DeFi, compliance was hardly questioned, and anonymous trading was the default rule of the community. In 2022, the SEC deemed mAssets to be unregistered securities, and Terraform Labs found itself embroiled in lawsuits, with anonymity becoming a fatal flaw.

At that time, the market was still small, and DeFi was more like a testing ground 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 will refer to tokenization as the "digital revolution of finance," and the loosening of policies will also pave the way for 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 navigate the legal pitfalls of Mirror in a compliant manner, but it also seems to have taken away the grassroots flavor of on-chain US stocks from previous years.

The Echo of Summer

The crypto space has changed so much 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, crypto has donned the cloak of compliance, walking a steadier path, but it has also lost some of its spontaneity and wildness.