Crypto Bros says they are rebuilding the Wall Street on-chain. They say tokens tied to real-world stocks like Nvidia, Apple and even Elon Musk's Tesla can make global investment easier, but when you start paying attention to the second, it's just confusion, fake prices, legal headaches, and zero guardrails.
At the end of June, Robinhood, Kraken, Gemini and Bybit introduced blockchain versions of American stocks and ETFs for non-Robinhood users in the US. They themed it after the Hitchcock movie.
But things didn't go as planned. Their tokens, built for businesses like Openai and SpaceX, which have not even been made public, sparked a backlash. Openai responded quickly on social media. “We are not affiliated with, or are not involved in, or endorsed with, Robinhood,” the Lithuanian central bank regulating Robinhood's European operations contacted the company for clarification.
Wild Price Swing hits tokenized stock after launch
On July 3rd, the Aplx token (reflecting Apple's stock) was $236.72, a 12% premium that exceeded Apple's actual price. Amznx's Amazon Token was spiked to $891.58 just two days later. This is four times the last close on Amazon.
However, the biggest dislocation occurred in Jupiter, a peer-to-peer trading platform, in the same week. One trader tried to buy AMZNX worth $500, but that alone sent the token to $23,781.22. It's more than 100 times the real value of Amazon.
All of these tokens were issued by Backed Finance, the Swiss company that deployed them on June 30th through a partnership with Kraken and Bybit. The backed ones call them “Xstocks” and claim to support the actual inventory one-on-one.
When people buy more tokens, the company buys more shares. When people sell, they burn tokens and throw away stocks. The idea is that the token price should stay close to the real price. However, in reality, these tokens are rarely traded.
Liquidity is weak, and small trading is sufficient to completely throw away prices, especially on weekends, evenings, or on holidays when the stock market is closed.
A supported spokesman is said to have told the journal: “We are actively tracking any of these price dislocations, and are involved in exchanges to fix this and follow best practices to ensure this does not happen.” However, Crypto is not known for its “best practices” especially when transactions are made on an anonymous platform.
Lack of surveillance opens the door for abuse
The US stock market relies on strict control. The brokerage will check your ID. The exchange monitors transactions. Regulators track suspicious activities. There is no whole system here. Backed's XStocks is “not allowed”.
This means you can move between your wallet and the platform with zero friction. Kraken may record his identity, but Jupiter is not. When tokens move to a decentralized platform, they will completely fall off the radar.
Gemini co-founder Cameron Winklevoss claimed that “by representing stocks, we believe that we can export US capital markets anywhere in the world.” But the dream ignores core issues. In other words, stocks traded without transparency or regulation will lead to disaster. Certainly, blockchain has publicly traded transactions, but as we saw with the Lazarus group in North Korea, it can hide its name and face forever. They may not be North Korea at all, as there is certainly no way to know. And that's exactly how insider trading and pump and dump schemes flourish.
“It's a can of worms and it's going to explode at some point because people find ways to do illegal things with these tokens,” said Carlos Domingo, CEO of Securitize.
And that's the real risk here. These tokens may seem like progress, but they also make it easier to ensure that market abuse is not detected. And there are zero signs that this is a one-off thing.
