Original Author: Alex Xu (X: @xuxiaopengmint)
Narrative Background
Just a few days ago, Coinbase's CEO Brian Armstrong and CFO Alesia Haas stated that they are considering tokenizing Coinbase's stock to enable trading of U.S. stocks on the Base blockchain.
In this innovation-scarce crypto cycle, primarily focused on PVP, we are finally seeing the dawn of something interesting.
If all goes well, U.S. stocks could become the third major category of RWA assets following stablecoins (USDT, USDC) and government bonds (Buidl). If the regulatory and compliance framework is clear and provides sufficient freedom for U.S. stock tokens, the tokenized U.S. stock assets should have the potential to surpass the current scale of tokenized government bonds in the short term, as they offer the high volatility and speculative nature that crypto users prefer.
Business Logic
Compared to narratives like Crypto AI agents and desci (decentralized science) that have emerged in this cycle, the value proposition of on-chain U.S. stocks is clear, with both supply and demand sides having explicit needs:
The value proposition of on-chain U.S. stocks is similar to other DeFi products, reflected in a larger free market and superior composability:
Expanded trading market size: It provides a 24/7, borderless, and permissionless trading venue for U.S. stock trading, which is currently not possible with Nasdaq or the New York Stock Exchange (although Nasdaq is applying for 24-hour trading, it is expected to be realized in the second half of 2026).
Superior composability: By integrating with existing DeFi infrastructure, U.S. stock assets can be used as collateral, margin, and to build index and fund products, leading to many currently unimaginable use cases.
The needs of both supply and demand sides are also clear:
Supply side (U.S. listed companies): They can reach potential investors from around the world through a borderless blockchain platform, gaining more potential buyers.
Demand side (investors): Many investors who previously could not directly trade U.S. stocks for various reasons can now directly allocate and speculate on U.S. stock assets through blockchain.
In fact, the idea of on-chain U.S. stocks has been attempted before. For example, Coinbase tried to issue security tokens (representing its stock $COIN) for listing back in 2020, but it was shelved due to regulatory hurdles from the U.S. SEC.
During the last DeFi boom, we also saw synthetic U.S. stock assets in products like Terra's Mirror and Ethereum's Synthetix, but they gradually faded due to the SEC's regulatory deterrence.
Even earlier, the securitized token issuance project Polymath, founded and financed in 2017, promoted the concept of STO (Security Token Offering), where companies issue tokens representing securities rights through blockchain technology, allowing investors to gain rights similar to traditional financial instruments like stocks and bonds (such as dividends and voting rights), which garnered significant market attention at the time.
Today, the main driving force behind the resurgence of the STO concept and the feasibility of on-chain U.S. stocks comes from the SEC's substantial shift in attitude after the leadership change, moving from strong regulatory opposition to supportive innovation within a compliance framework.
Within sight, STO may be one of the few narratives in this cycle that has a significant impact, a coherent business logic, and a high ceiling.
Related Targets
Based on the narrative background and logic, we can outline the relevant targets in the crypto secondary market.
In fact, there are not many well-established STO concept projects that have issued tokens and are listed on major exchanges.
The most relevant might be Polymath, which was established in 2017 and was one of the first to educate the crypto industry about the STO concept. It later launched the Polymesh blockchain, a public permissioned blockchain designed for compliant assets (such as security tokens), featuring built-in identity verification, compliance checks, privacy protection, governance, and instant settlement.
Polymesh has a good reputation in the industry; for instance, BlackRock issued a $500 million digital bond on Polymesh last November, and real estate giant CBRE also issued property fractionalization tokens based on it.
The Polymesh token has been listed on Binance, named Polyx, with a current market cap and FDV of over 100 million, which is not high.
Additionally, while RWA concept projects like Ondo have primarily focused on the tokenization of government bonds in the past, their products can also be adjusted according to compliance regulations to serve the tokenization of stocks. Moreover, Ondo has close ties with the Trump family, which may provide more overt or covert conveniences, even endorsements from family members (although the marginal impact of such actions has been diminishing).
Chainlink has also done extensive work connecting numerous traditional financial institutions with blockchain, and as a mainstream oracle solution and security tokenization service provider, it theoretically stands to benefit from this.
Risks to Note
The reason this article uses "latent" to describe the current STO narrative is that there are still many uncertainties regarding its potential rise. Although the new SEC's various actions (such as withdrawing numerous crypto lawsuits) suggest a more lenient attitude towards STOs, when a clear compliance framework to guide STOs will be established remains unknown and requires close observation, as it will determine the pace at which companies like Coinbase can follow up and advance.
A recent observation event was the first roundtable meeting held by the SEC's crypto working group on the 21st of this month. The roundtable itself was designed to provide a clear regulatory framework, and the theme of this first meeting was "Defining Securities Status: Historical and Future Pathways," with one of the agenda items being the design of compliance pathways.
Notably, one of the main speakers at this event was Paul Grewal, Chief Legal Officer of Coinbase, a key player in the rise of the STO narrative.
If the compliance framework related to STOs is slow to be established and the waiting time is prolonged, the currently latent narrative may lose momentum or even fade away.
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