What are tokenized stocks? Explained

What are tokenized stocks? Explained originally appeared on TheStreet.

Ian De Bode, chief strategy officer at Ondo Finance, told TheStreet Roundtable that tokenized stocks “will very much lead to a similar innovation in asset management and brokerage” as stablecoins did for payments.

He compared the two by highlighting how tokenization takes traditional assets — like cash or equities — and represents them as digital tokens on blockchain rails.

Tokenized stocks follow the same three‑step process as stablecoins.

First, the underlying stock is placed in a custodian or clearing broker account and immobilized.

Second, a token is issued on a blockchain to represent that share.

Third, the token can move freely on‑chain, granting holders a digital claim on the locked stock.

Explained: What is tokenization?

How tokenized stocks work

De Bode explained that stablecoins work by having cash held in reserve and issuing tokens redeemable for the underlying value.

“With a stablecoin, you take the cash, you put it into a custodian and you issue a token that represents that value on-chain that is always redeemable for the value of the underlying,” he said.

To tokenize stocks, the same model applies. Stocks are held at a custodian or via the DTCC, then tokens are minted one‑for‑one. These tokens can be distributed globally — especially to non‑US investors — and settle instantly.

Because blockchain rails run 24‑7, tokens move at any hour without traditional trading‑hour limits.

De Bode noted that billions of people lack easy access to U.S. markets. Tokenized stocks and ETFs open those markets by eliminating high minimum balances and fees.

“Just like the stablecoin gave global access to the U.S. dollar, tokenizing stocks and ETFs can give global access to U.S. capital markets,” he said.

Explained: What are memecoins?

Global access and DeFi integration

Beyond access, tokenized stocks are programmable. They integrate with smart contracts — self‑executing code on blockchains — that automate functions such as lending or collateralization.

In DeFi, users could pledge tokenized stocks as collateral for margin loans without manual intervention.

De Bode compared this to margin in traditional brokerages, which often require multiple accounts and vary margin rates. With tokens, investors enjoy consistent, algorithm‑driven terms and can move collateral freely.

He predicted crypto exchanges and brokerages will adopt tokenized stocks to offer U.S. equities to their global customers.

To ensure tokens track their underlying, Ondo will support instant minting and burning. Large market makers can arbitrage any on‑chain price divergence, similar to maintaining a stablecoin’s peg to $1.

Story ContinuesTokens will carry a small collateral buffer and be fully backed by the underlying stock or ETF, plus yield dividends reinvested in custody.

Ondo Global Markets

Ondo Global Markets is Ondo Finance’s upcoming platform for tokenized U.S. stocks and ETFs. “Ondo Global Markets is the name of the platform that will tokenize publicly listed equities, so U.S. stocks and ETFs that trade with sufficient liquidity 24‑5,” De Bode said.

“These stocks are going to be issued in a stablecoin‑like structure, but to non-US investors. The token on-chain is always backed one for one with a stock or a corresponding stock or ETF sitting at the clearing broker account, plus a small collateral buffer on top to make sure that everything is always over collateralized.”

The platform will support instant minting and burning so global holders can trade 24‑7 with full economic exposure.

Investor protections and U.S. rollout

Ondo Finance issues tokens as debt instruments, giving holders a senior secured claim on collateral. This structure ensures token holders can redeem at par value and are protected if the issuer defaults.

De Bode emphasized transparency around reserves and legal rights as critical for investor confidence. Currently, tokens are offered only to non‑US investors under a continuous‑registration exemption.

Ondo is engaging with the SEC and preparing to acquire a regulated broker‑dealer to eventually serve U.S. investors. De Bode said the SEC has been open to discussions on providing exemptive relief for tokenized equities.

By mirroring stablecoin innovation, tokenized stocks promise to transform asset management and brokerage for a global audience — offering 24‑7 access, seamless programmability and robust protections for the next era of digital finance.

What are tokenized stocks? Explained first appeared on TheStreet on Jul 25, 2025

This story was originally reported by TheStreet on Jul 25, 2025, where it first appeared.

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