What Are Tokenized Equities? A Comprehensive Guide

Stock trading hasn’t fundamentally changed in decades, which makes many of its features feel outdated in today’s super-connected online world. The majority of stock markets operate within a strict schedule, typically observing the business hours of the locales in which they are based, and remain closed throughout weekends and national public holidays. Settlements can potentially take several days. International access often requires currency conversions and sometimes complex account management. Finally, advanced actions like fractional ownership require specific brokers that allow the buying and selling of fractional shares.

Tokenized equity changes all these. By wrapping traditional stocks in blockchain infrastructure, tokenized equities create a parallel market that trades continuously and settles instantly. It also opens access to anyone with an internet connection and a crypto wallet. Technically, it is a key component of the broader asset tokenization revolution, a significant factor in reshaping the future of finance.

In this article, Ledger Academy breaks down what tokenized equities are, how they work, and why they matter.

Let’s dive in.

What Are Tokenized Equities?

Tokenized equities are digital assets that represent ownership or a stake in a company, with this ownership recorded on a blockchain network. They are designed to track the value and performance of the underlying company shares. Simply, tokenized equity is a form of a tokenized asset, which is a unique digital representation of financial instruments that trade on a blockchain instead of a traditional brokerage.

The model of these tokens mimics how fiat-collateralized stablecoins maintain their peg, where, in its case, a qualified custodian or registered broker-dealer holds the underlying stock in a secure account. A corresponding digital token is issued onchain to represent that share or instrument. 

Simply put, each token is backed 1:1 by actual shares held in a regulated custody. Therefore, when the actual share value appreciates or declines, the value of the token also changes. You can think of owning a tokenized equity as equivalent to owning a digital certificate representing a claim to the actual real-world asset (RWA) – an asset class within blockchain representing the digital tokens of tangible and intangible assets existing in the physical world.

Whereas tokenized stocks specifically refer to the tokenized stocks of publicly traded company shares, tokenized equities encompass multiple classes of RWAs such as shares, real estate, stakes in private companies, and other financial instruments. Because their issuance and management are onchain, the underlying infrastructure facilitates more flexible trading options. This includes the ability to transact outside of regular stock market hours. 

In short, tokenized equity provides companies with a new way to raise capital, issue shares, and manage ownership records directly onchain. 

Tokenized Vs Traditional Equities

Although tokenized equity may represent the same ownership rights as their traditional counterparts, the shift of these assets onto blockchain introduces some notable differences. Some of the core differences include:

Trading Hours and Settlement

Traditional stocks often trade during exchange hours and close on weekends and holidays. This trading hour restriction limits trading flexibility, especially for global investors in different time zones. On the other hand, you can trade tokenized equity 24/7 on blockchain platforms, which never sleep and operate even during holidays.

Additionally, while traditional equities usually take one to two business days to settle, tokenized equities settle almost instantly, often within seconds (or minutes). This means you own the tokens the moment the transaction confirms on the blockchain.

Accessibility and Global Reach

Traditional equity markets impose geographic restrictions, minimum account balances, complex verification processes, and costly currency conversions for international investors. In contrast, blockchain’s borderless nature and the perpetual availability of digital tokens remove the constraints of geographical time zones and local brokers or intermediaries. 

To explain, tokenized equity operates on blockchains, which are borderless and accessible to anyone with internet access and a crypto wallet. As such, tokenization facilitates global equity trading, reducing coordination friction for international participants. However, availability is still dependent on regional regulations and platform licensing.

Fractional Ownership

High-value shares in private companies, often referred to as late-stage equity, typically limit participation to a select group of wealthy individuals, accredited investors, and large institutional investors. In addition, acquiring illiquid assets, such as real estate, fine art, and collectibles, demands considerable capital that small investors lack. And while retail investors can purchase fractions of some of these shares in the traditional setup, acquiring them requires using specific brokers that offer this service.

On the other hand, tokenized equity inherently supports fractional ownership, meaning that you can own a portion of a high-value share rather than purchasing it whole. This democratization facilitates retail participation in markets previously reserved for institutions and wealthy investors, typically lowering the entry barriers. It also helps make traditionally illiquid assets more liquid.

Custody and Control

With traditional stocks, your broker or a central custodian holds the shares while you only hold a claim against the broker. This means that while you’re the beneficial owner, the shares exist in the broker’s custody system. If the broker fails or freezes your account, accessing your assets requires legal intervention.

With tokenized equities, you can directly hold tokens in your Ledger signer, where your private keys control the assets directly. No intermediary can freeze, restrict, or seize your holdings. But this also means you bear full responsibility for security: you lose your keys and you lose your assets.

How Do Tokenized Equities Work?

Acquisition and Custody

A licensed and regulated financial institution or custodian purchases the real shares or assets intended for tokenization. These shares are then placed under regulated custody, providing the necessary collateral for the corresponding tokens issued on a blockchain.

The custodians typically ensure the secure storage of these shares. They must also adhere to regulatory standards, including implementing Know Your Customer (KYC) and other Anti-Money Laundering (AML) protocols, within their operating jurisdiction. To maintain transparency and verify the backing, they routinely undergo audits and publish proof of reserves. These regular audits confirm that the token supply in circulation precisely matches the number of shares held in custody.

Token Creation and Issuance

The issuer then mints an equivalent number of digital tokens on a smart contract-compatible blockchain, such as Ethereum and Solana, to represent these real-world assets (RWAs). The result is a digital token that mirrors the value, rights, and performance of the underlying asset. Each token is backed 1:1 by a share, or a fraction of a share, in custody. 

Smart contracts are deployed to manage the tokenized versions of the shares. These contracts automate the rules of the token, including ownership rights, voting rights, transfer conditions, and dividend distributions. 

Furthermore, blockchain oracles are utilized to provide real-time price data from traditional markets to ensure that the token’s value actually reflects the underlying stock’s price. They also report corporate actions (like dividends) and verify that backing reserves remain intact.

Trading and Redemption

Once issued, these tokens can be traded on cryptocurrency exchanges that support tokenized assets. Investors can hold the tokenized assets in their own Ledger signers. They can also redeem their tokens for the equivalent fiat currency or stablecoin, at which point the tokens are burned or destroyed to maintain the 1:1 peg.

Top Projects for Tokenized Equity

Ondo Finance

Ondo Finance is a decentralized finance (DeFi) platform bringing financial instruments onchain through tokenization. It operates global markets, allowing regulated institutions to tokenize U.S. stocks, exchange-traded funds (ETFs), and bonds, where the issued tokens are backed 1:1 by shares at its SEC-registered digital assets broker-dealer. Ondo mints the tokens using several chains, including Ethereum, Solana, Sui, Ripple, and Sei.

Ledger’s Ondo Finance integration allows users to access over 100 tokenized U.S. equities. This means users can trade tokenized equities directly through their Ledger Wallet^TM, solving both the user experience and compliance hurdles.

Backed Finance

Backed Finance is a Swiss-regulated RWA issuer that provides the underlying infrastructure for tokenized equities, most notably xStocks – a series of Solana Program Library (SPL) tokens (and other chains) collateralized 1:1 by real-world U.S. equities and ETFs. It issues tokens that are 1:1 backed by actual shares of traditional assets like AAPLx for Apple stock, held in custody by regulated broker-dealers. 

The platform has been a key driver in the multichain expansion of tokenized stocks, with deployments across Solana, BNB Chain, Tron, and Ethereum. Backed Finance’s model primarily serves non-U.S. users, offering a compliant and efficient way to access U.S. equity exposure outside of traditional market hours and regional restrictions. Their assets are used as collateral within the DeFi ecosystem, allowing investors to generate yield on their stock holdings.

Swarm Markets

Swarm Markets is a licensed, BaFIN-regulated decentralized exchange (DEX). It offers a fully compliant way to trade tokenized major stocks (like Apple and Nvidia) and other RWAs within a regulated framework. Swarm uses an automated market maker (AMM) model to provide deep, on-chain liquidity for these assets.

The platform uses its native SMT token, which saw high price volatility after its 2024 peak, within its ecosystem. Its primary strength lies in its strong regulatory compliance, attracting institutional investors seeking legal certainty.

The Future of Tokenized Equity

Tokenized equity flips the script on the inefficient infrastructure of regular markets, moving global markets from multiple-day settlements to instant settlements and idle shares to instant collateral.

Security fundamentals don’t change whether you’re holding Bitcoin or tokenized Apple shares. Ledger signers simplify how you secure and manage your digital assets, including tokenized equities. Ledger’s Clear Signing lets you verify transaction details on your device’s screen before approving anything. Moreover, through Ledger Wallet^TM, you can directly buy your crypto and access platforms like Ondo Finance, which facilitates access to over 100 tokenized equities.