Key facts
- Over 50% of tokenized stock trading occurs outside regular U.S. market hours.
- About 80% of tokenized stock trades are for less than one share.
- Tokenized equities were about 1.5 times more volatile and less liquid than traditional stocks.
- The IMF urged regulators to consider circuit breakers for 24/7 trading.
- The market for tokenized stocks is valued at approximately $2.3 billion.
- Ondo Finance and Backed Finance's xStocks account for over 70% of the tokenized stock market.
Tokenized stocks, which are blockchain-based tokens tracking publicly traded companies, show signs of real demand but remain volatile and illiquid compared to traditional equities, according to the International Monetary Fund's latest Global Financial Stability Report. The IMF's analysis, covering 365 days across 11 trading venues for five liquid tokenized U.S. equities including Tesla and Nvidia, found that over 50% of trading occurs outside regular U.S. market hours. Approximately 80% of these trades involve less than a full share, indicating strong demand for fractional ownership, particularly among retail investors.
Despite the on-chain prices carrying real information, with traditional shares absorbing 87% to 99% of overnight price movements from their tokenized counterparts, tokenized equities exhibited roughly 1.5 times greater volatility and significantly lower liquidity. This disparity was more pronounced on decentralized exchanges, where prices deviated further from traditional markets. The market is currently small, valued at about $2.3 billion, and concentrated, with Ondo Finance and Backed Finance's xStocks holding over 70% of the market share. These firms issue synthetic tokens offering price exposure without direct share ownership.
Given the nascent stage of the market, the IMF cautioned that its findings should be interpreted with care and that systemic risks are currently limited. However, the organization recommended that regulators consider implementing circuit breakers for 24/7 trading and enhance monitoring of the links between tokenized and traditional markets. The report emerges as major financial players like the NYSE, ICE, Securitize, and Cboe are increasingly involved in the tokenization space.