Asset tokenization is transforming how we interact with traditional financial instruments, bringing stocks, bonds, and funds onto blockchain networks. Backed Finance, a Swiss-based platform, has emerged as a significant player in this space with its xStocks product. These tokens represent real-world stocks on the Solana blockchain, offering global accessibility and near-instant settlement. This article explores how Backed Finance is navigating the complex landscape of compliant asset tokenization and the challenges it faces in achieving widespread adoption.
Understanding Backed Finance and xStocks
Backed Finance operates as a compliant asset tokenization platform based in Switzerland. Their flagship product, xStocks, represents tokenized versions of popular stocks that are 1:1 backed by actual securities held in regulated Swiss banks like InCore Bank and Maerki Baumann. These tokens are issued on the Solana blockchain using the SPL standard, enabling 24/7 trading and immediate on-chain settlement.
The platform has gained significant exchange support, with major platforms like Bybit and Kraken listing xStocks products. According to compliance requirements, these tokens are currently unavailable to U.S. residents but are accessible to users in other regions. The tokens carry International Securities Identification Numbers (ISIN), providing them with regulatory recognition in European markets.
The Team Behind Backed Finance
The founders of Backed Finance bring experience from the blockchain space, having previously worked at DAOstack, a project that raised approximately $30 million between 2017-2018. While their previous venture ultimately ceased operations, the team leveraged their experience to create Backed Finance in 2021, recognizing the potential for bringing traditional assets onto blockchain networks.
The company has secured substantial funding, including a $9.5 million Series A round in April 2024 led by Gnosis with participation from Exor Seeds, Cyber Fund, and Mindset Ventures. This financial backing has supported their expansion and regulatory compliance efforts across multiple jurisdictions.
Product Ecosystem and Technical Implementation
Backed Finance offers two primary product lines: xStocks for tokenized equities and bTokens for index funds and short-term bonds. All tokens maintain 1:1 backing with physical assets held by regulated custodians. The platform has deployed its tokens across multiple blockchain networks including Ethereum, Solana, Avalanche, Base, and Polygon.
The technical structure of xStocks tokens is particularly interesting from a regulatory perspective. Rather than representing direct equity ownership, these tokens function more like corporate debt instruments that track the underlying assets. This structural approach allows for easier regulatory compliance since debt instruments don't require the same licensing as equity distribution.
This debt-based structure enables several advantages:
- Dividend distributions through token airdrops
- Elimination of corporate actions processing
- Bearer instrument characteristics similar to stablecoins
- No ownership registration requirements
- Absence of stamp duties traditionally associated with equity transfers
The platform has integrated with major DeFi protocols including Kamino Finance, Raydium, and Jupiter Exchange, supporting various decentralized finance strategies like lending, market making, and arbitrage.
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Current Trading Experience and Liquidity Challenges
Despite significant exchange support, xStocks faces substantial liquidity challenges. Trading activity remains concentrated in just six major tokens: NVDAx (Nvidia), MSTRx (MicroStrategy), TSLAx (Tesla), CRCLx (Circle), SPYx (S&P 500 ETF), and AAPLx (Apple). Data from early trading periods shows promising initial engagement but highlights the concentration issue.
Initial chain data revealed approximately $133,800 in trading volume with 1,225 unique traders on the first day of availability. The following day saw significant growth to $6.64 million in volume with 6,565 new traders. However, this activity remained heavily focused on just a few assets, with many tokens experiencing minimal trading activity and substantial slippage issues.
Trading occurs through two primary channels: on-chain decentralized exchanges and centralized exchange internal matching. Bybit offers USDT trading pairs while Kraken supports fcurrency transactions with minimum purchase requirements. Both channels currently face liquidity limitations that affect user experience compared to traditional trading platforms.
Target Audience and Structural Advantages
Backed Finance primarily serves non-U.S. users who face barriers accessing U.S. markets through traditional brokers. The platform particularly appeals to crypto-native users seeking exposure to traditional equities without leaving the blockchain ecosystem.
Key advantages include:
- Stablecoin compatibility and support for small transactions
- No requirement for traditional brokerage accounts
- 24/7 trading availability with instant settlement
- Regulated asset custody with EU compliance
- Direct blockchain integration for DeFi applications
Future Development Paths
While xStocks provides important infrastructure for tokenized assets, several development paths could address current limitations and expand the ecosystem.
Derivatives and Perpetual Contracts
The development of equity perpetual contracts ("stonk perps") represents a promising direction. These derivatives would allow exposure to price movements without requiring physical settlement, potentially overcoming liquidity limitations while appealing to crypto traders familiar with leveraged products. Decentralized platforms could implement these instruments with oracle price feeds and funding rate mechanisms.
Pre-IPO Equity Tokenization
Tokenization of private company equity represents another significant opportunity. Blockchain technology could transform private markets by enabling more transparent and accessible trading of pre-IPO shares. Companies like OpenAI and SpaceX could potentially benefit from this approach, though regulatory challenges remain substantial.
This approach could incorporate DAO governance structures, contract-based lock-ups, and investor accreditation mechanisms to maintain compliance while improving market efficiency.
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Frequently Asked Questions
What are xStocks tokens?
xStocks tokens are blockchain-based representations of traditional stocks that are 1:1 backed by actual securities held in regulated custodial accounts. They enable trading and settlement on blockchain networks while maintaining regulatory compliance.
Who can purchase xStocks?
Currently, xStocks are available to non-U.S. residents only. U.S. persons are prohibited from purchasing or holding these tokens due to regulatory restrictions.
How do xStocks differ from traditional stock ownership?
While xStocks track the price of underlying equities, they represent debt instruments rather than direct equity ownership. This structural difference affects dividend distributions and corporate actions but enables better regulatory compliance and blockchain compatibility.
What blockchains support xStocks?
xStocks are available on multiple blockchain networks including Solana, Ethereum, Avalanche, Base, and Polygon, allowing users to choose their preferred ecosystem.
How are dividends handled?
Dividends are distributed through token airdrops to holders rather than traditional cash payments, maintaining the fully digital nature of the investment.
What are the main advantages of tokenized stocks?
Key benefits include 24/7 trading availability, instant settlement, accessibility without traditional brokerage accounts, and integration with DeFi applications for enhanced yield opportunities.
Conclusion
Backed Finance's xStocks represent a significant step forward in compliant asset tokenization, demonstrating sophisticated product design through cross-chain deployment and DeFi integration. However, current limitations in liquidity and user adoption present challenges for the现货 model alone to drive widespread adoption.
The future likely involves a combination of approaches including derivative products and pre-IPO tokenization that could transform blockchain-based securities from utility products into truly tradable assets. As regulatory frameworks evolve and technology improves, asset tokenization may eventually provide seamless access to global markets regardless of geographic or socioeconomic barriers.
The journey toward fully realized asset tokenization continues, with Backed Finance helping to pave the way through compliant, innovative solutions that bridge traditional finance with blockchain technology.