Revisiting STO: What Barriers Remain for the Full Implementation of Tokenized U.S. Stocks?
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Revisiting STO: What Barriers Remain for the Full Implementation of Tokenized U.S. Stocks?
This article will explore the possibility, pathway, and long-term implications of listing U.S. stocks on the blockchain.
Navigating Web3 tides with focused insightsHost: Alex, Research Partner at Mint Ventures
Guest: Mindao, Founder of dForce
Recording Date: 2025.3.14
Disclaimer: The views discussed in this podcast do not represent the opinions of the institutions affiliated with the guests, and any projects mentioned do not constitute investment advice.
Hello everyone, welcome to WEB3 Mint To Be, brought to you by Mint Ventures. Here, we continuously question and deeply reflect—clarifying facts, understanding realities, and seeking consensus within the WEB3 world. We aim to unravel the logic behind trending topics, provide insights that go beyond surface-level events, and introduce diverse perspectives.
Alex: Today’s episode follows up on a crypto narrative that was highly anticipated years ago, gradually cooled down, but has recently reignited: STO, or securities tokenization—especially the tokenization of U.S. equities. Our guest today has extensive experience in both traditional finance and DeFi, and is also a returning friend of our show—Mr. Mindao. Please say hello to our audience, Mindao.
Mindao: Hello everyone, glad to be back at Mint Ventures to discuss STO and securities tokenization.
The Story Behind Coinbase's Stock Tokenization
Alex: The resurgence of STO as a renewed narrative largely stems from recent statements by Coinbase’s CEO and CFO about restarting their stock tokenization efforts. I’m sure you’ve followed this news. Based on your knowledge, could you walk us through the background of Coinbase’s stock tokenization, including key details?
Mindao: This isn’t a new idea introduced this year. I remember it being discussed as early as 2020, but due to the harsh regulatory environment for crypto at the time—and especially after Coinbase was sued by the SEC—the plan didn’t move forward. Brian mentioned the concept again around the time of Coinbase’s IPO, sparking debate within the community: should a crypto-native exchange go public or issue its own token? Shouldn’t it just launch directly on-chain? The topic resurfaced in January this year when Jesse, the head of Base, suggested deploying Coinbase’s token on the Base chain. Then in February, the SEC dropped its case against Coinbase—an indication, I believe, of the new administration’s friendlier stance toward crypto. Both the CFO and CEO have since reiterated plans to tokenize the stock on Base. Timing-wise, this feels very strategic. After Trump took office, his administration showed clear support for crypto, exemplified by the Crypto Summit that Coinbase’s CEO attended. So when the regulatory landscape shifts like this, it makes perfect sense for the largest U.S. exchange to take such a step—it’s well-aligned with the current moment.
The Value Proposition of Stock Tokenization
Alex: From your perspective, what are the core value propositions of STO—or equity tokenization—if we treat it as a product? Are these organic benefits? And if large volumes of U.S. equities were to go on-chain, how might they interact with existing DeFi products?
Mindao: Equity tokenization isn't a new topic; it's been discussed across multiple cycles. I recall STO being talked about as far back as 2017. Its revival now has several drivers. One major factor is that while crypto innovation stalled under regulation, traditional finance—particularly Wall Street and interbank systems—has made significant progress adopting blockchain. Traditional financial institutions now clearly see the advantages of tokenization. For example, JPMorgan has already moved many of its interbank settlement systems onto tokenized infrastructure. This drastically reduces settlement times. Even within the same bank, cross-state or cross-border settlements can take days or even a week. With blockchain, settlement happens instantly. The immediate benefit? Reduced capital lockup and significantly lower funding costs. Financial institutions recognize this advantage clearly.
From a pure capital access standpoint, tokenizing stocks transforms a single-market offering into a global one. This blends permissioned and permissionless systems—but there are inherent conflicts. Traditional securities regulations follow territorial principles: the U.S. has its rules, China has its own, etc. But when integrating with public crypto chains, how do you reconcile jurisdictional boundaries? That’s a huge challenge. In a way, tokenizing stocks is like tearing down the Berlin Wall. How does free-flowing global capital enter a tightly regulated, location-bound equity market? There are deep structural tensions here. However, for companies pursuing STO and stock exchanges alike, expanding the investor base from regional to global is likely a primary motivation.
Coinbase’s situation differs significantly from typical stock tokenizations because it *is* an exchange. You could compare Coinbase’s stock to Binance’s BNB. BNB is essentially a successful example of tokenized equity. Coinbase’s stock, by contrast, represents a traditional shareholder certificate. But look at BNB: it offers fee discounts, airdrop eligibility, and various utilities within its ecosystem. So the real significance of Coinbase tokenizing its stock isn’t merely putting a share on-chain—it’s about **empowerment**. It’s an expansion of rights. Imagine Coinbase issuing its tokenized stock on Base, and then allowing users to stake it for node validation or gas payments. Suddenly, the stock becomes more than a passive ownership instrument—it gains utility. Extend this idea further: suppose Disney tokenizes its shares. Shareholders could get discounted park tickets or special access. Why hasn’t this happened traditionally? Because integrating legacy systems is too complex without tokenization. But once assets are on-chain, such integrations become feasible. Netflix could offer subscription waivers based on staked shares. A coal mining company’s stock may gain little utility from tokenization, but firms like Coinbase, Netflix, or Disney—whose products already engage users directly—have strong potential to transform their shares from mere equity into functional, utility-bearing tokens. This, I believe, is where STO truly intersects meaningfully with crypto—not just replicating traditional stocks on-chain, but reimagining them. Earlier, we discussed expanding the capital pool from regional to global. But let’s be honest: the U.S. market already dominates global fundraising. Adding another layer via blockchain—what tangible benefit does that bring? Not much, perhaps. That’s why past STO tokens saw little trading volume—they failed to attract demand beyond what traditional markets already serve.
Alex: This idea of “equity empowerment” is fresh and insightful. Following up: you mentioned JPMorgan improved capital efficiency using blockchain-based settlement. Technically speaking, JPMorgan likely uses a system akin to a consortium chain. What specific technical designs enable such efficiency improvements? I’ve always been curious about this.
Mindao: Banks are often seen as technological dinosaurs. Many of their backend systems date back decades. Still, from a financial institution’s perspective, conservative technology choices make sense—when dealing with money, proven and battle-tested systems prioritize security over capital efficiency. Even within a single bank, reconciling different internal systems causes friction; internationally, it’s worse. Take JPMorgan operating in the U.S. and the UK—each country has distinct regulatory regimes, requiring external systems like SWIFT for cross-border settlements. Inter-branch settlements face delays due to compliance checks and fragmented processes. Blockchain solves this by providing a unified ledger where all participants maintain synchronized state—no need for reconciliation between disparate backends. This is why financial institutions immediately recognized blockchain’s transformative potential: it can fully replace outdated banking infrastructure. That’s also why stablecoins gained rapid adoption—they emerged organically, yet posed such a direct threat that regulators and banks now closely monitor them. From day one, traditional finance understood that stablecoins offered a superior alternative to legacy interbank settlement.
Interaction Between On-Chain U.S. Equities and DeFi
Alex: Got it. If large-scale U.S. equity tokenization takes off, how might it interact with existing DeFi protocols? Do you view this positively? Is it important for industry development?
Mindao: For DeFi infrastructure, the key point is that most DeFi applications today—DEXs, lending platforms, stablecoin protocols—primarily support native crypto assets like ETH and BTC, along with memecoins and other on-chain-native instruments. DeFi infrastructure adapts to whatever assets flow upstream. For downstream users, the arrival of real-world assets (RWA) is undoubtedly beneficial. Beyond stablecoins, the largest category of tokenized assets today is U.S. Treasuries. We’re seeing strong traction this cycle, with projects like MakerDAO and Ondo bringing Treasuries on-chain. These tokenized Treasuries have injected substantial yield-generating assets into DeFi—pools on Pendle, Uniswap, and elsewhere are now filled with interest-bearing instruments. In terms of liquidity, RWA-backed stablecoins and assets have become crucial liquidity sources for the entire DeFi ecosystem.
Extending this to equities, the benefits would be similar. Crucially, DeFi infrastructure today is mature: AMMs, order books, perpetual futures, bridges—all are built, battle-tested, and largely secure. From DeFi Summer to now, despite hacks totaling $10–20 billion, the core infrastructure has stabilized. By "stabilized," I mean the foundational layers are technically solid and trusted. This means STO integration doesn’t require rebuilding the wheel. New assets can plug directly into existing rails. Contrast this with traditional institutions—they’d need to build entire chains and DeFi ecosystems from scratch, which is extremely difficult. Now, with narratives like Bitcoin ETFs and Treasury tokenization gaining mainstream attention, adding equities becomes a natural next step. The infrastructure is ready. For DeFi, this means more tradable assets, better liquidity, and stronger fundamentals for all underlying protocols—a clear win.
Does STO Align with U.S. National Interests?
Alex: Zooming out: if STO becomes compliant and widely adopted, would U.S. public companies—like consumer-facing firms such as Disney or Netflix—find it appealing? Could equity empowerment generate meaningful incremental benefits? More broadly, does this trend align with long-term U.S. national interests?
Mindao: We must differentiate between company types—not all are suited for on-chain issuance, nor will all attract equal interest. Early attempts at stock tokenization often focused on Tesla because its investor base overlaps with crypto users. No one tried tokenizing coal or industrial stocks—there’s no overlap. So companies with crypto-savvy audiences—AI firms, tech giants—are best positioned to benefit from expanded capital pools and user engagement.
From a national perspective, the alignment with U.S. interests is becoming increasingly clear. Right now, the top regulatory priority in Washington is the stablecoin bill—because it reinforces dollar dominance. Similarly, as home to the world’s largest stock market, the U.S. stands to gain significantly from equity tokenization. First, operational costs for financial institutions would plummet. Processes like shareholder voting and dividend distribution require massive backend support today. Tokenization could replace aging infrastructure entirely. Second, treating U.S. equities like dollar-pegged stablecoins extends American financial influence globally. In that sense, it clearly serves U.S. strategic interests.
However, this doesn’t necessarily align with every incumbent financial player. Stablecoins threaten traditional banks’ business models. Similarly, tokenized equities could disrupt brokerage firms—many intermediaries become redundant on-chain. Direct access to DeFi eliminates middlemen. This could fundamentally reshape the U.S. equity market structure. That’s precisely why progress is slow: powerful stakeholders stand to lose.
Alex: This touches on something I’ve wondered about: stablecoins greatly expand the dollar’s reach and utility. Yet Europe and other regions seem hesitant to promote their own. There’s little momentum behind euro or yen stablecoins. Even China, pushing RMB internationalization, hasn’t launched an RMB stablecoin. Don’t they see the strategic value? Why aren’t they acting as aggressively as the U.S.?
Mindao: Honestly, I wouldn’t have been optimistic about dollar stablecoins either—if not for Trump’s election. Interestingly, Trump didn’t push for a government-issued digital dollar. In fact, he signed an executive order banning federal issuance of so-called “dollar tokens.” What the U.S. supports instead are privately issued tokens—banks, exchanges, and corporations can issue them, but the federal government cannot. There’s clear concern about centralized state power over money. Meanwhile, the EU is expected to launch its own stablecoin this year—but theirs will differ fundamentally. U.S. stablecoins are private-sector-led; the EU version will likely be government-issued. The key difference lies in currency convertibility. The dollar, euro, and yen are all freely convertible, making non-custodial stablecoins viable. But China is different—its currency isn’t freely convertible. Creating a freely circulating, permissionless stablecoin like USDT would clash directly with capital controls. That’s why China faces a dilemma. If they issue a restricted, KYC-heavy stablecoin mirroring fiat limitations, it loses utility. Domestic digital yuan functions similarly to traditional wallets—adoption is slow. The conflict arises from monetary policy design. For freely floating currencies like the dollar and euro, the question is *how* to roll out stablecoins: U.S.-style (private sector, hands-off government) vs. EU-style (public issuance). But for countries with capital controls, the tension between financial openness and monetary sovereignty is hard to resolve. A state-issued digital currency with full traceability and strict transfer rules offers no advantage over traditional payments—users won’t adopt it. The goals are fundamentally at odds.
Barriers to Stock Tokenization
Alex: Understood. Indeed, China’s digital yuan has seen limited adoption and slow rollout. Back to STO: after Coinbase announced its renewed tokenization plans, a Swiss RWA provider called Backed quickly issued its own tokenized version of Coinbase stock on Base. But recent data shows low trading volume and severe de-pegging issues. As you said, not all stocks are suitable for tokenization. Beyond company type, what other factors hinder these products?
Mindao: Several challenges exist. Issuing a stock token resembles launching a stablecoin—first, the issuer matters immensely. If Coinbase’s token weren’t issued by Backed Finance, but by JPMorgan or Bank of America, credibility would be higher. The biggest issue is redemption: who stands behind the token? Can I redeem it for actual shares? FTX once issued Tesla tokens via a German broker. Third-party issuers must have binding commitments from custodians to redeem underlying assets—that’s critical. De-pegging usually results from insufficient market makers or broken redemption channels. Just like stablecoins maintain parity through arbitrage (e.g., minting/redeeming USDT via Tether), stock tokens require accessible redemption paths. If market makers can’t quickly redeem and sell underlying shares, price divergence occurs. If Coinbase itself issues the token, trust increases dramatically. Also, recall our earlier discussion about “expanding rights”—only Coinbase can grant staking or gas utility to its token on Base. Backed Finance can’t do that. That kind of innovation requires first-party involvement. Moreover, many crypto users already access U.S. equities through offshore accounts—so simply offering on-chain stock exposure isn’t enough to drive mass adoption. That’s why past synthetic stock tokens—including ones we built—failed to gain traction. Purely targeting crypto users to buy U.S. stocks hasn’t worked.
Alex: Understood. Suppose Coinbase officially launches its STO product—who else needs to be involved besides Coinbase?
Mindao: First, market makers are essential—but not necessarily designated ones. As long as Coinbase provides a clear conversion path between stock and token (like stablecoin minting/redeeming), liquidity providers will naturally emerge. This channel is non-negotiable. Second, liquidity depth matters. Backed Finance deployed pools on Aerodrome, but AMM pricing may be inefficient unless liquidity is deep. Order book models might work better. Multiple DEXs should support it, ideally with official liquidity incentives. Relying solely on third parties is risky. I think Coinbase should tightly integrate this with Base. Most people come to Base hoping for token upside. If Coinbase ties its stock to Base’s ecosystem, it becomes the only exchange that’s both a public company and crypto-native—a unique hybrid. But that requires thoughtful design beyond just listing the stock.
Alex: If Coinbase succeeds, could it inspire other U.S. companies—say, Stripe or Tesla—to issue officially sanctioned STOs on Base? How likely is that?
Mindao: Legally, you don’t need a company’s permission to tokenize its stock. It’s analogous to issuing a dollar stablecoin—you don’t need the Fed’s approval, only sufficient USD reserves. As long as issuers comply with U.S. securities laws, they can create tokenized shares without corporate consent. The product design varies: will it be KYC-restricted, or open to all? Coinbase’s token likely won’t require KYC and can be bought directly on-chain. An open, permissionless model would attract more companies by creating a new liquidity pool. But regulatory clarity is still lacking. For instance, some T-bill tokens on Curve restrict purchases to whitelisted (KYC’d) users because they’re classified as security tokens. My understanding is that stock tokens are inherently securities, so broad retail access may not be permitted. This creates a go-to-market dilemma: if only KYC users can participate, the audience shrinks, turning it into a zero-sum game competing with traditional brokers like Futu. It becomes a fight for existing customers, not new growth.
Alex: How did BlackRock design purchase permissions for its BUIDL token?
Mindao: BUIDL requires KYC. Its distribution targets institutional clients and DeFi protocols—not retail investors. Only KYC-compliant entities receive allocations. They can then redistribute tokens internally. BUIDL operates in the institutional market: whether you're a DeFi protocol or on-chain financial product, I’ll issue to you if you’re verified. What you do afterward is your business. It mirrors the stablecoin minting model—tiered issuance to authorized agents rather than direct retail distribution. This approach is relatively sound.
Why STO Is Heating Up Again & Market Outlook
Alex: Understood. We’ve discussed STO before—back in 2017, projects like Polymath tried but failed to gain traction. Now, many players are revisiting the space. Beyond the post-Trump regulatory shift, are there other demand-side or structural factors driving renewed interest? And do you expect strong market performance over the next 1–3 years?
Mindao: Stock-like tokens predate 2017. During the last DeFi cycle, Synthetix had synthetic assets, Luna’s Mirror project experimented, we tried it too—we launched four or five tokens, but trading volume was poor. At the time, we attributed it to flawed designs—Synthetix used extreme over-collateralization, leading to low capital efficiency. FTX also listed Tesla stock derivatives, but volume remained modest. The core issue, I think, was market composition. Before 2022’s DeFi Summer, most crypto participants lived by the mantra: *“long crypto, short the world.”* Many entered crypto seeking asymmetric returns—huge upside with minimal correlation to traditional markets. These users looked down on real estate, commodities, stocks. Selling stocks in this crowd was like selling ice in Antarctica. Demand wasn’t low—it was mismatched.
Now, several shifts are underway. First, the approval of Bitcoin and Ethereum ETFs has brought massive inflows from traditional finance. Second, look at stablecoins: ~$230–240 billion in supply, but only tens of billions actively used in DeFi. Most holders are people we know—friends, family—who don’t care about crypto ideology. They hold stablecoins purely as dollar proxies. The market structure has changed. Previously, it was mostly crypto-natives. Now, increasing numbers come not to speculate, but to hold dollars on-chain. These users are comfortable with traditional assets. If you offer a seamless way to buy U.S. stocks with stablecoins—bypassing the cumbersome path from RMB to USD to IBKR, with all its banking hurdles—it could easily displace legacy systems. The demand exists. Why do I think it could materialize in 3–5 years? Because the user base has evolved. Unlike six years ago, we now have non-crypto users who are familiar with stock investing. On-chain trading is far more convenient. The only missing piece is robust infrastructure—limited token options, high slippage. Right now, equity tokenization resembles DeFi in 2017–2018, before DeFi Summer. I’m cautiously optimistic: given a compliant issuance framework, a meaningful market could emerge within 3–5 years. The key hurdle remains regulatory clarity—whether compliant on-chain issuance is possible. Everyone’s still testing. Even Coinbase is experimenting. But if a legal pathway opens, the market can grow.
Who Benefits from an STO Wave?
Alex: Looking ahead, assuming a compliant framework emerges and the market takes off—who stands to benefit most? DeFi? Layer1/Layer2? Specific RWA projects?
Mindao: The best analogy is stablecoins. Dollar-pegged stablecoins are the largest RWA asset class—tokenized fiat receipts. In that space, the biggest winners were the issuers—not the underlying dollar, but the entities that turned it into a scalable, liquid token. The same applies here. Success hinges on **liquidity network effects**: whoever captures early liquidity creates a moat that’s hard to displace. If someone successfully tokenizes high-volume assets like QQQ or the Nasdaq index—and achieves USDT-like liquidity—they become indispensable. Beneath the surface, there’s room for innovation: margin trading, lending against tokenized shares, revenue from issuance fees. But the primary beneficiaries will be the issuers themselves—especially those that scale rapidly. Look at ETFs or money market funds: first movers dominate. Bitcoin ETF leaders today will likely retain outsized market share for years. The network effect compounds as the pie grows. Once on-chain, tokenized stocks will spawn synthetic derivatives—just as USDT/USDC enabled countless DeFi products. This creates deep, defensible moats. So yes, issuers will gain the most.
Alex: If these issuers launch multiple assets, which chains will they favor? Ethereum, with its credibility and “canonical” status? Or high-performance chains like Solana or Base?
Mindao: The playbook is clear: follow USDT. Issue everywhere. USDT’s story is fascinating—it was created by Bitfinex, yet other exchanges accepted it despite competitive risks. That’s why Binance, OKX, and Huobi later launched their own stablecoins, which aren’t interoperable. But USDT existed before alternatives, achieved ubiquity, and became the default. Equity tokenization will follow suit: deploy wherever demand exists. Centralized inventory management allows multi-chain distribution. I don’t believe any chain holds inherent RWA advantages. Ethereum has more USDT because demand is higher—not due to technical superiority. For issuers, the decision comes down to market size and protocol depth: where can the most capital flow? Where are the largest DeFi ecosystems? That’s where they’ll go. Scale trumps chain-specific features.
Current State of Crypto Policy
Alex: Understood. Much of our discussion centered on STO, underpinned by a broader shift toward regulatory acceptance. Our last policy-focused episode was about three months ago—since then, much has happened. Trump launched a meme coin; the Trump family initiated World Liberty Financial to buy crypto assets; Trump signed an executive order on a Bitcoin strategic reserve. On the downside, proposed Bitcoin reserve bills failed in nearly half a dozen states. Some argue that Trump has fulfilled most of his pro-crypto promises, and further tailwinds may be limited. How do you assess the current policy landscape? Are there key upcoming events worth watching?
Mindao: My feelings are mixed. On one hand, policy developments have exceeded expectations in both speed and scope. Elevating Bitcoin to a U.S. strategic reserve asset—alongside gold and key commodities—is a monumental shift in framing and ambition. That alone is hugely positive. But on the other hand, execution raises concerns. Without Trump’s personal crypto ventures—his meme coin, Melania’s token, World Liberty Finance’s activities—I’d feel more optimistic. Behind the scenes, it appears coordinated by a “meme coin cartel.” World Liberty has approached major projects proposing mutual token swaps—“you buy ours, we’ll buy yours”—and discussed acquiring exchange tokens. When connected, this paints a troubling picture. Crypto’s strength has always been its anti-fragility—its independence from governments. Its rise wasn’t state-sponsored; it grew wild and decentralized. Now, it feels hijacked by the Trump family. What happens in four years? Worse, Trump appears to blur public duty with private gain. All these measures are enacted via Executive Orders (EOs). A future Democratic administration could repeal them overnight—just as Trump overturned over 100 Biden-era EOs. The next four years hinge on whether EO-driven policies can transition into permanent law via Congress and state legislatures. Only then will they survive political cycles. But right now, everything is tied too closely to Trump’s personal interests—turning public tools into private instruments. Consider the rumored $1 million tickets to the Crypto Summit—even in developing nations, that’s absurd. Now, many crypto OGs have gone silent. They can’t tell if this is genuine progress or exploitation. It depends on how much gets codified into law. Some in crypto are choosing to play along—catering to Trump’s circle. But what happens in three to five years? Already, Democrats have launched investigations into Trump’s crypto dealings. Sentiment is complex.
Alex: Initially, many saw Trump’s support as a major policy tailwind. But when he launched his own coin and proposed including ADA, SOL, and XRP in national reserves alongside Bitcoin, the seriousness evaporated.
Mindao: Exactly—credibility collapsed. We thought this was a serious national strategy to make America the “Capital of Crypto.” Then it became clear: it’s personal enrichment. The mission shifted from public good to private gain. The market’s turning point came after Trump and Melania launched their tokens, followed by revelations about Libra’s token and manipulation networks. That’s when the market began to decline. Confidence fractured. Was this real policy or performative self-dealing? Consensus broke down.
Alex: Yes, many hoped for federal Bitcoin reserve legislation, but after January’s chaos, most state-level proposals failed in February.
Mindao: Trump’s meme coins, World Liberty Finance’s transactions—including rumored exchange token acquisitions—create clear conflicts between public authority and private profit. Are these policies serving the nation or the family? A parallel case is Tesla. Its stock dropped ~50% from peak, partly because investors see it as too tied to Musk. Tesla’s volatility mirrors Musk’s controversies. People opposed to Trump’s Ukraine stance, for example, avoid Tesla stock. Over-association with political figures is dangerous. That’s why many now feel uneasy—Trump’s brand is too dominant.
Alex: Especially since Trump is in his second term—he won’t run again. He has at most three more years.
Mindao: Even if another Republican wins, they may not continue these policies. Honestly, after years in crypto, I struggle to tell if these moves are for public or private benefit. It doesn’t feel purely altruistic.
Alex: Well, that wraps up our discussion on STO and current policy dynamics. Thank you so much, Mindao, for joining us. Hope to have you back soon. Thanks!
Mindao: Of course, thank you.
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