Tokenized equities will be ‘bigger than stablecoins’: Backed CEO

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Kraken announced last week that it would soon list Solana-based tokenized equities, in what looks partly like the exchange’s latest step to lure Solana investors.

This forthcoming xStocks product was developed in tandem with a startup named Backed, and Backed’s ambitions don’t end with Kraken users or the Solana ecosystem.

“The vision is that you can buy an xStock on Kraken, you can withdraw it, and then you can deposit on Coinbase or you can deposit on Orca, you can leverage it on Kamino,” co-founder Adam Levi told me in an interview. Levi said separately that xStocks would be launching on other centralized exchanges, and the product would be available on other blockchains “at some point.”

Levi said Backed originated when he and his co-founder examined crypto’s product-market fit surrounding stablecoins — which are currently basically tokenized US Treasurys — and wondered what asset class could be tokenized next. Four years ago, Levi says, they concluded the answer would be public equities.

Granted, others are asking this same question, and not all are reaching the same conclusion. The buzzy tokenization firm Securitize, for example, has set about tokenizing a private credit fund — essentially offering exposure to elevated yields created by riskier private loans — offered by Apollo Global. The product will be onboarded to Kamino, it was announced last week.

Still, Levi told me he thinks the upside for tokenized public equity is significant.

“I think it’s going to be bigger than stablecoins, and volumes are almost in a way going to compete with TradFi,” Levi said of the sector. He said demand could primarily come from non-US residents who want easier access to American securities and young people for whom trading tokens may feel more intuitive than opening a brokerage account.

Throughout our interview, Levi cast Backed as being having a similar business model to a stablecoin issuer insofar as it creates and ostensibly collects revenue on a tokenized product that is then exchanged on other venues.