Swiss-based company selects Switzerland as location to sidestep whitelist for tokenized Tesla share issuance, reveals CEO.
In the ever-evolving world of finance, a new player has emerged in the form of xStocks. These digital representations of traditional stocks like Tesla and Nvidia, freely transferable as opposed to those constrained by a whitelist, are making waves in the market, particularly in Switzerland.
Backed Finance, the company behind xStocks, began issuing these tokens under its brand in June. The company chose Switzerland as its jurisdiction of choice due to its regulations allowing for the issuance of freely transferable digital representations of stocks. This is a departure from some other jurisdictions that require a whitelist, a feature typically used in crypto to grant individuals approval to participate in specific events.
Adam Levi, co-founder of Backed Finance, argues for a permissionless approach, citing the example of stablecoins, which function similarly to xStocks, serving as an IOU for $1. Levi believes that xStocks could see real adoption outside of the country, similar to the adoption of stablecoin issuers Circle and Tether.
The Swiss legal framework for xStocks is explicitly 'innovation-friendly,' according to a fact sheet published by a Swiss government agency in 2023. However, no search results explicitly state which companies have received rights to issue xStocks tokens launched by Backed Finance in Switzerland.
Despite the lack of transparency regarding the companies involved, xStocks have gained traction. As of Wednesday, xStocks had 30,300 total unique holders, according to a Dune dashboard. Tesla's associated token was the most popular, with 43,000 tokens tied to $18 million in Tesla shares.
Backed Finance is not alone in this space. They are competing with similar offerings from retail brokerage Robinhood and tokenization platform Securitize. However, their permissionless approach sets them apart, aligning with Levi's belief that this is the best approach for adoption.
Regulators in the U.S., including SEC Commissioner Hester Peirce, have raised concerns about tokenization this year. Peirce stated that tokenization doesn't trump existing securities laws. This poses a challenge for the global adoption of xStocks, as they are not available in the U.S., and the tokens are issued under Swiss legislation passed in 2020.
The debate surrounding xStocks and other tokenized equities is far from over. Companies like OpenAI have denounced tokens tied to them as unauthorized, adding another layer of complexity to the discussion. As the industry continues to evolve, it will be interesting to see how xStocks and other similar offerings navigate the regulatory landscape and shape the future of finance.
