Stock Tokenization Platform: How to Find a Balance Between Compliance and Retail Investors

In the Web3 world, the on-chain of real-world assets (RWA) is becoming a hot topic, with tokenized stocks gaining attention due to their mature underlying assets, manageable technical thresholds, and increasingly clear regulatory paths. This article will explore how to build a tokenization platform for stocks that can reduce compliance pressure while reaching the retail investor market.

Robinhood Model: Product Innovation in Securities Trading

Although Robinhood is not a traditional on-chain platform, its operating model provides valuable insights for the design of Web3 products:

1. Core Features:

   • The interface is simple, avoiding complex terminology.
   • Zero commission, low threshold, directly serve retail investors
   • Securities clearing and custody are completed by partner institutions.

2. Place of Registration and Compliance Structure:

   • Headquartered in California, USA
   • Subsidiaries hold relevant licenses and are regulated by the SEC and FINRA
   • Stock trading services are limited to US users

3. Reason for regional restrictions:

   • Avoid complex cross-border securities sales licensing
   • Avoid the high costs and uncertainties brought by strong local regulations in various countries.

xStocks Model: An Innovative Attempt at Tokenization of Real Stocks

xStocks achieves token trading of stock price mapping through clever structural design, while avoiding the red line of securities regulation:

1. Core Structure:

   • Token is 1:1 mapped to stocks, held by institutions.
   • The Token does not have voting rights, dividend rights, or governance rights.
   • "Dividends" are reinvested automatically.
   • Require basic KYC, allow on-chain transactions

2. Entity Structure and Registration Location:

   • The issuer is registered in Jersey, and the service entity is registered in Bermuda
   • Deliberately evade the applicability of U.S. law

3. Service Limitations:

   • Clearly stated that services will not be provided to high-regulation areas such as the United States, European Union, and the United Kingdom.
   • Mitigate regulatory risks through IP restrictions and KYC measures

Comparison and Insights of Two Models

Robinhood represents "doing securities within a compliance framework," while xStocks embodies "avoiding securities regulation through structural design." Entrepreneurs should learn how to create a platform that can go live, grow, and avoid pitfalls through legal structures, technical pathways, and compliance isolation.

Key Elements of Building a Stock Tokenization Platform

1. Role Division:

   • The platform is responsible for price mapping, Token issuance, and user interaction.
   • The partner is responsible for position holding, reporting, and risk isolation.
   • Both parties interact through agreements and information synchronization mechanisms, with clear separation of regulatory responsibilities.

2. Necessary Partners:

   • Licensed broker
   • Blockchain issuance platform and technology party
   • Legal Advisor
   • KYC/AML service provider
   • Smart Contract Auditor

3. Key Protocols:

   • Token issuance white paper and legal disclosure instructions
   • Asset Custody Service Agreement
   • Platform User Agreement and Risk Disclosure Statement
   • Compliance Service Integration Agreement
   • Token and platform interaction contract documentation

Compliance Considerations

To avoid regulatory risks, the following points must be noted:

• Tokens cannot promise returns, confer governance rights, or grant claims.
• Strictly restrict access for users in high-regulation areas
• Use terms that may raise regulatory concerns with caution.
• Implement strict technical and protocol controls
• Prepare comprehensive legal documents and compliance records

Conclusion

Stock tokenization is a promising but carefully designed project direction. The key to success lies in finding the right landing point, designing a clear structure, defining the representative meaning of the Token, and avoiding crossing the red lines of users, markets, and law. The current market is not yet saturated, providing opportunities for visionary entrepreneurs. It is crucial to start on the right path from the beginning, building a platform that is regulatory compliant, user-friendly, and technically feasible.