In what’s described as a significant step towards mainstream Blockchain adoption, U.S. public company DeFi Development Corp. (formerly Janover) announced it will tokenize its shares via a partnership with crypto exchange Kraken. According to Monday’s announcement, the tokenization will be done using the Solana-based xStocks platform created by Backed to bring its shares on-chain.
The groundbreaking move between DeFi Development Corp, Kraken, and xStocks signifies a powerful shift in the area of traditional asset tokenization. It’s proof that tokenizing traditional assets is no longer a theory but a reality. For crypto, everyday investors, and even governments, the implications are much bigger than anticipated.
DeFi Development Corp (DDC) is Making History
By tokenizing its shares directly on Solana, DeFi Development Corporation becomes the first publicly-traded US company to issue its shares on a Blockchain. The tokenized shares will be issued on xStocks, but made available through Kraken. What this means is investors will be able to trade and transfer the digital versions of the shares on Kraken, just like crypto. This is different via trading on the traditional stock exchange.
Tokenization is the mechanism of using digital tokens to represent real-world assets, such as stocks, bonds, real estate, commodities, equity, etc., on the blockchain. Each token is a share of the underlying asset tokenized. In the case of DDC, the company is tokenizing its equity shares, allowing them to be traded like crypto. CEO of DeFi Development Corporation Joseph Onorati revealed in a statement that he views the tokenization of its shares as a DeFi Lego block, a foundation that developers can build on top of.
Companies Move Towards Asset Tokenization
Companies like DDC are pivoting towards tokenization because of its benefits. First, it changes how the world views ownership. Tokenization allows expensive assets, such as real estate and equity, to be owned fractionally (divided into small parts), enabling more and equal participation. For instance, you could own 0.1% of a luxury apartment.
In addition, tokenization changes how we think about liquidity. Unlike traditional financial markets that close on evenings and weekends, you can trade blockchain tokens 24/7. Liquidity can be accessed anytime on Blockchain, and transactions are settled instantly. With traditional systems, settlement takes hours or even days, which increases risk of counterparty. Besides, anyone with an internet connection can invest in tokenized assets, irrespective of location.
For publicly-traded companies like DDC, tokenizing assets isn’t just about optics – it allows them to reach crypto-native investors who are familiar with blockchain-based assets. By tapping into this niche of investors, DDC can expand liquidity.
Kraken and xStocks Are Building Infrastructure for Asset Tokenization
One of Kraken’s mantras is innovation, and the crypto exchange has been at the forefront of it since inception. By collaborating with xStocks, Kraken is blurring the lines between traditional finance and decentralized finance. Meanwhile, xStocks is positioning itself as a decentralized platform where tokenized public company shares can be traded.
Kraken had previously revealed plans to offer tokenized versions of U.S. stocks like Apple, Tesla, and Nvidia to non-U.S. users through xStocks in May. The exchange promised not to restrict these tokenized offerings to United States users.
What Does the Future of Tokenization Hold?
Tokenization is a trend that’s just getting started. Boston Consulting Group revealed that tokenized assets could hit $16 trillion by 2030. Countries, such as Singapore and Hong Kong are piloting tokenized bond issuance. Robinhood hinted at offering tokenized US securities to European investors.
DDC’s move highlights the growing importance of tokenized assets and how they offer a better alternative to traditional stock markets. Following the report of tokenization, DDC’s shares rose 3%.