Why not consider creating one yourself since Robinhood and xStocks are so popular?

Introduction

RWA (Real World Asset on Chain) is rapidly becoming the mainstream narrative in the Web3 world, and one particularly "down-to-earth" direction—Tokenized Stocks—is currently one of the most feasible directions.

The reason is simple:

• The underlying asset is mature enough, and there is no need to spend energy to "prove its value";
• The technical threshold is relatively controllable, and there are already established tools for on-chain issuance and mapping;
• Regulatory pathways are becoming increasingly clear, especially in Europe and certain offshore areas, where real projects have already been implemented.

However, many people instinctively think of the words "stocks" and wonder: Is this securities? Can it be sold to retail investors? Is a license required?

But in reality, some projects have found a way to "balance both ends." They can reduce compliance pressure while reaching the retail market. A representative example is:

• Robinhood: The most popular retail securities platform in the United States;
• xStocks: Stock token trading in non-EU and non-US regions, available for buying and selling on-chain.

As a lawyer focused on Web3 compliance, I have also started to receive similar inquiries frequently:

• How does a stock tokenization platform operate?
• Do small to medium-sized teams like ours have a chance to do this?
• If you want to do it, where should you start and how should you structure it legally?

This article does not use big words, does not elaborate on concepts, and focuses on answering one question:

How should you create a stock tokenization platform that allows retail participation and has controllable compliance pressure?

Robinhood Model: The Ultimate Productization of Retail Securities Trading

Robinhood is not a traditional on-chain platform, but its operating model is highly inspiring for the design of Web3 products.

1. Core Features:

• Minimalist interface, eliminating the complex terminology of traditional brokers;
• Zero commission, no minimum deposit, directly serving retail investors;
• All securities clearing and custody are completed by partner institutions;

2. Registration Location and Compliance Structure:

• Robinhood Markets Inc. was founded in Menlo Park, California, USA;
• Subsidiaries Robinhood Financial LLC and Robinhood Securities LLC hold relevant licenses for U.S. securities trading and are under the dual regulation of the SEC and FINRA;
• In addition to its securities business, Robinhood also has subsidiaries in places like the UK that engage in cryptocurrency asset services, but its stock trading services are explicitly not available to non-U.S. users.

3. Reason for Regional Restrictions:

Robinhood only serves the US market for two main reasons:

• If securities trading is opened to overseas users, it will face complex securities sales licensing and registration obligations in regions such as the EU, Canada, and Japan;
• Securities regulation in various regions shows a strong trend of localized stringent supervision, while the compliance costs for overseas expansion are high, and the risks are uncertain.

xStocks Model: Token Mapping of Real Stocks + Non-Security Declaration + Retail-Oriented

xStocks is currently one of the few platforms that has turned "stock price mapping" into tokens and offers trading, allowing retail investors to participate while deliberately avoiding the red line of securities recognition.

1. Core Structure:

• Each xStock Token is mapped 1:1 to a stock, which is actually held by a brokerage or custodian.
• Tokens do not confer voting rights, dividend rights, or governance rights, and the platform does not promote them as "securities";
• The platform's "dividends" for Token holders adopt a structure of "automatic reinvestment" in the form of tokens, that is: if there are stock dividends, the user's wallet will not receive cash, but will instead receive an equivalent increase in tokens.
• Users must complete basic KYC, tokens can be traded on-chain, but access is not open to users from highly regulated jurisdictions.

2. Entity Structure and Registration Location:

• The issuer of the Token is Backed Assets (JE) Limited, registered in Jersey, which is not part of the EU and is not directly subject to MiCA or Prospectus Regulation;
• The service entity is Payward Digital Solutions Ltd., registered in Bermuda, which belongs to a loose financial regulation zone;
• The xStocks product is issued by non-U.S. entities, deliberately avoiding the applicability of U.S. laws.

3. Prohibited Areas and Restriction Logic:

xStocks explicitly lists the countries or regions to which it does not provide services:

United States (including all U.S. Persons), EU member states, United Kingdom, Canada, Japan, Australia.

The reason is:

1. These regions have extremely strict regulations on securities issuance. If xStocks are sold locally, they are likely to be classified as illegal securities issuance;

2. The platform has not obtained licenses or compliance exemptions in these regions, therefore actively circumventing regulation through IP restrictions + KYC restrictions.

3. Choosing to register the issuing entity in Jersey and Bermuda is also a common strategy to reduce compliance risks.

The essential difference and common insights between these two modes.

The two paths essentially represent two kinds of logic:

• Robinhood: "Doing securities within the regulatory framework"
• xStocks: "Avoid securities regulation through structural design"

Entrepreneurs do not have to take sides; instead, they should learn how to isolate the platform through legal structures, technological paths, and compliance so that it can "go online, grow, and avoid pitfalls."

If you really want to do it, how should it be implemented structurally?

Stock tokenization is not as simple as copying a contract; you need to at least design the following roles and divisions of labor:

The key is:

• The platform is responsible for 'price mapping + token issuance + user interaction';
• The partner is responsible for "position + report + risk isolation";
• Both parties are interconnected through agreements and information synchronization mechanisms, but regulatory responsibilities are clearly separated.

Which institutions need to be coordinated with, and which agreements need to be signed?

Stock tokenization is not an isolated system and must rely on the following resources for interaction:

1. Partner:

• Licensed broker (responsible for the custody of real stocks or trade execution);
• Blockchain issuance platform and technical party (contract deployment + permission control module + oracle);
• Legal Advisor (Token Qualitative Analysis, Structural Design, User Agreement);
• KYC/AML service provider;
• Smart Contract Auditor.

2. The agreement to be signed includes:

• Token Issuance White Paper + Legal Disclosure Statement (Offering Terms);
• Custodial Service Agreement / Custody Proof (Custodial Agreement);
• Platform User Agreement + Risk Disclosure Statement (T&C);
• Compliance Service Integration Agreement (KYC, IP Blocking, etc.);
• Token and Platform Interaction Contract Description Document.

A few points you might not be aware of but must consider.

Once these points are hit, what you face is not community FUD, but the real action of regulation:

• Tokens shall not confer any "promises of returns", "governance rights", or "claim rights";
• Do not open to users from high-sensitive legal jurisdictions such as the EU, the USA, and Japan;
• Do not use terms such as "stocks", "shareholder rights", or "dividends";
• Must control region and identity through both technology and protocol.
• Legal opinion letter, risk disclosure statement, and KYC review records should be prepared for reference.

Whether you can do it or not depends not on the license, but on the structure.

Stock tokenization is a viable project direction that requires careful design. It is neither as "unregulated" as NFTs nor as "rule-bound" as traditional securities. What you need to do is not to break out aggressively, but to:

• Find a suitable landing spot
• Design a clear structure
• Clarify what your token represents
• Avoid crossing the three red lines of users, market, and law

This market is not saturated; instead, it is in a gap where institutions are cautious but interested, and entrepreneurs are interested but dare not enter. Stop looking at what others are doing. The track of stock tokenization is not crowded yet; once it is truly occupied by giants, you will only be able to act as a user.

As a Web3 compliance lawyer, I would prefer to help you design a platform that is "regulatory compliant, user-friendly, and technologically feasible." It's not about achieving everything at once, but ensuring we start off on the right foot.