USDT may be able to trade U.S. stocks. Is the blockchain and STO of U.S. stocks a technological innovation or the next bubble?

In March 2025, Coinbase CEO Brian Armstrong announced that he was considering tokenizing the company's stock and trading it on its Base blockchain. This news was like a depth bomb, reigniting the market's attention to security token issuance (STO) and real-world asset tokenization (RWA). In a cycle of dull innovation in the crypto industry, this narrative is seen as a potential milestone in breaking through the boundaries between traditional finance and blockchain. This article will analyze the transformative potential of US stocks on the chain and STO from multiple dimensions such as technical logic, business value, and opportunity risks, and explore the financial paradigm shift that it may trigger.

1. The essence and historical evolution of STO

1.1 Definition and technical core of STO

STO (Security Token Offering) is the issuance of security tokens. Its core is to tokenize traditional financial assets (such as equity, debt, real estate, etc.) through blockchain technology to form regulated on-chain securities. Compared with ICO (initial coin offering), STO needs to be anchored to real assets and comply with securities law requirements; compared with IPO (initial public offering), STO automates the issuance process through smart contracts, significantly reducing compliance costs.

Technically, STO usually adopts protocols such as ERC-1400 to support functions such as permission management, compliance checks, and dividend distribution. For example, the Polymesh blockchain ensures the compliance of token issuance and transactions through built-in KYC (know your customer) and AML (anti-money laundering) modules.

1.2 From ICO to STO: a paradigm upgrade driven by regulation

The ICO wave in 2017 was chaotic due to lack of supervision, and the emergence of STO marks the industry's transformation to compliance. The US SEC classified most tokens as securities through the Howey Test, forcing project parties to choose the STO path. Typical cases include the first compliant STO completed by tZERO under Overstock in 2018, and Telegram raising $1.7 billion through the Reg D exemption clause.

Although early STOs were limited by investor thresholds (such as Reg D requiring qualified investors to have a net worth of more than $1 million) and liquidity restrictions (one-year lock-up period), they combined the equity attributes of traditional securities with the efficiency advantages of blockchain, laying the foundation for asset on-chain.

2. Business logic and value proposition of U.S. stocks on the chain

2.1 A trading revolution that breaks the boundaries of time and space

Traditional U.S. stock trading is limited to the 9:30-16:00 trading hours of the New York Stock Exchange and Nasdaq, while on-chain U.S. stocks can achieve 7×24 hours of global circulation. Coinbase plans to issue tokenized stocks $COIN through the Base blockchain, which not only provides investment channels for crypto native users, but also enables retail investors in Africa, Southeast Asia and other places to bypass geographical restrictions to participate in the U.S. stock market. This "borderless liquidity" may reconstruct the global capital distribution pattern.

2.2 The explosive potential of DeFi composability

On-chain U.S. stocks can form a chemical reaction with existing DeFi protocols:

Collateral and leverage: Users can use tokenized stocks as collateral and borrow stablecoins on platforms such as Aave for reinvestment;

Derivatives innovation: Synthetix has tried to synthesize assets to track Tesla's stock price, and there may be option-based volatility products in the future;

Index fund automation: AMM protocols such as Balancer can create on-chain ETFs containing constituent stocks such as Apple and Google, and rebalance through algorithms.

These scenarios push the deconstruction and reorganization of traditional financial instruments to the extreme.

2.3 Win-win logic on both supply and demand sides

Supply side: listed companies can reach global long-tail investors through STO, which is especially beneficial for small and medium-sized enterprises to reduce IPO costs. For example, real estate projects can divide $50 million in assets into millions of small shares through tokenization;

Demand side: emerging market investors can allocate global assets without opening a US stock account, and crypto users can combine their high-risk preferences with the volatility of US stocks to create a new dimension of speculation.

3. Positive opportunities for US stocks on the chain

3.1 Historic turning point in regulatory attitude

After the SEC changes its term in 2025, its policy will shift from "strong regulatory confrontation" to "innovation within the compliance framework." The SEC roundtable held on March 21 listed "defining securities status and compliance paths" as the core agenda, and the attendance of Paul Grewal, chief legal officer of Coinbase, hinted at the willingness of regulators to collaborate with the industry.

3.2 Maturity of technical infrastructure

Oracle network: Chainlink has provided stock price data on-chain services for institutions such as Citi and Swift, solving the problem of off-chain and on-chain information synchronization;

Compliant public chain: Polymesh achieves a balance between privacy protection and regulatory auditing through a layered architecture, and institutions such as BlackRock have issued digital bonds on it;

Cross-chain protocol: Cross-chain bridges such as Axelar can connect STO assets of different blockchains to form a unified liquidity pool.

3.3 Exponential imagination of market size

Global stock assets are about 70 trillion US dollars, debt and real estate exceed 300 trillion US dollars, and the current on-chain RWA scale is less than 100 billion. If the tokenization penetration rate of US stocks increases to 1%, its market value will far exceed the existing stablecoins and treasury tokens. Projects such as Ondo Finance have proved the feasibility of expanding from treasury tokens to stock tokens, and its OUSG product scale has increased by 380% in one year.

4. Potential risks and challenges of putting US stocks on the blockchain

4.1 Ambiguity and lag in the regulatory framework

Although the SEC has softened its attitude, specific rules have not yet been implemented. Whether terms such as Reg A+ (US$50 million financing limit) and Reg S (exemption from overseas issuance) are suitable for STO still needs to be verified. More seriously, there is a lack of regulatory coordination among countries: China prohibits citizens from participating in overseas securities investment, and the United States may follow the asset freezing measures in the Russia-Ukraine conflict and impose sanctions on US stocks on the chain. Regulatory arbitrage and sovereignty conflicts may make STO a tool for geopolitical games.

4.2 Uncontrollability of technical risks

Oracle manipulation: If the Chainlink node is attacked, erroneous stock price data may cause derivative contracts to be liquidated in succession;

Cross-chain vulnerabilities: The theft of US$320 million from the Wormhole cross-chain bridge in 2024 shows that there are still systemic risks in cross-chain assets;

Compliance failure: Anonymous wallets may bypass KYC restrictions, turning STO into a money laundering channel.

4.3 Structural contradictions in market acceptance

Investor mismatch: Crypto native users (Degens) pursue high APR (annualized return), while the average return rate of US stocks is only 7%-12%, which is difficult to meet their speculative needs;

Traditional institutions resist: Asset management giants such as BlackRock are worried that tokenization will weaken their custody business and may lobby regulators to set up obstacles;

Liquidity illusion: Although STO claims to improve asset liquidity, the lock-up period and qualified investor restrictions of Reg D still constitute substantial barriers.

V. Future Outlook: Subversion or Bubble?

5.1 Short-term: Narrative Drive and Regulatory Game

2025-2026 will be a critical window for the development of STO. If the SEC clarifies the compliance framework, projects such as Coinbase and Polymath may be quickly implemented; conversely, regulatory delays may lead to capital shifting to emerging tracks such as AI and DeSci. It is worth noting that the Trump administration tends to relax crypto regulation, and its appointment of "Crypto Mom" ​​Hester Peirce as the head of the SEC Crypto Working Group may accelerate policy breakthroughs.

5.2 Medium-term: Infrastructure arms race

In the next three years, three major technology tracks will determine the success or failure of STO:

Compliance protocol: whether to develop smart contract standards that meet the supervision of both SEC and EU MiCA;

Cross-chain interoperability: establish an atomic settlement and compliance verification system for cross-chain assets;

Institutional-level entry: open up institutional channels between custody platforms such as Fireblocks and Coinbase Prime.

5.3 Long-term: Financial democratization and sovereignty game

If the technology matures, STO may promote financial democratization - African farmers can invest in Apple stocks, and Vietnamese programmers can crowdfund equity in Silicon Valley startups. But this also means that capital flows are out of control of sovereign states, and the Bank for International Settlements (BIS) has warned that a "central bank on the chain" mechanism needs to be established. Ultimately, whether STO can succeed depends on the game results between the traditional financial power system and the concept of encryption without borders.

Conclusion: Innovation dancing on the edge of a knife

The essence of US stocks on the chain and STO is to try to use blockchain technology to reconstruct the rules of the game that have been running on Wall Street for hundreds of years. It not only carries the ideal of improving financial efficiency and expanding capital inclusiveness, but also faces the realistic challenges of regulatory crackdown, technical loopholes and market irrationality. For ordinary investors, this may be a new entry point to participate in global asset allocation; for the crypto industry, it may be a Trojan horse to the mainstream financial world; and for regulators, it will become a touchstone to test the flexibility of the system. Regardless of the outcome, this experiment has pushed the boundaries of financial innovation into unknown deep waters.