On Tokenized Stocks and Crypto-Stock Platforms

Several platforms now provide stock exposure through crypto rails. Robinhood and Kraken appear to have relatively organic usage. One reason is simple: they are not constantly promoted by Chinese crypto KOLs. MyStonks is promoted much more aggressively in that circle, but I am less confident about its technical depth.

The key question is whether a crypto-stock platform can connect liquidity from two markets. It needs liquidity from the traditional equity market. It also needs liquidity from the crypto market. These two requirements create a design trade-off between stability and decentralization.

At a high level, current designs fall into two categories.

The first category uses tokenized securities with ownership mapping and redemption. In this design, a token is linked to a real underlying security, and the user can redeem or otherwise settle against that underlying asset. This design usually requires identity verification, at least KYC. It is therefore not fully decentralized. On the other hand, the compliance layer gives the system a more stable asset mapping. The redemption path also enables arbitrage. If the on-chain token price deviates from the off-chain stock price, arbitrageurs can bring the two prices back together. In this case, the platform imports part of the liquidity from the stock market, so the pressure on market makers is lower.

The second category uses synthetic tokens. In this design, the token does not represent ownership of the underlying stock. There is no direct redemption path. The platform instead relies on oracles, funding rates, or other market mechanisms to track the reference price. This design can avoid KYC and is closer to the crypto-native model. However, its liquidity is isolated. The token becomes a separate pool that only references the external stock price. As a result, the market maker has to absorb much more pressure, especially during volatility.

I have not used these platforms in a serious way. Some of them require KYC that I cannot pass. Others, such as Robinhood, did not even allow me to register with my email. MyStonks seems easier to access, but heavy KOL promotion makes me cautious.

The open question is therefore quite concrete. Is there a technically strong crypto-stock dApp that does not require KYC?