tl;dr
Backed Finance, a platform for tokenized stocks, relocated to Switzerland to leverage its regulatory flexibility. The company launched xStocks, digital representations of real-world stocks like Tesla and Nvidia, which function as "wrappers" for actual shares held off-chain, allowing free transferabi...
**Backed Finance’s Swiss Move: Balancing Compliance and Decentralization in Tokenized Stocks**
When Adam Levi, co-founder of Backed Finance, set out to build a platform for tokenized stocks, he faced a familiar dilemma: how to reconcile the open, permissionless ethos of decentralized finance (DeFi) with the rigid compliance requirements of traditional finance. The answer, as it turned out, was a Swiss Alps-inspired solution.
Backed Finance relocated to Switzerland after evaluating five jurisdictions, ultimately choosing the European nation for its regulatory flexibility. There, the company launched xStocks—digital representations of real-world stocks like Tesla and Nvidia—that are freely transferable, bypassing the need for restrictive “whitelists.” In crypto, whitelists are often used to grant access to events like NFT minting or initial coin offerings. For tokenized equities, they could limit who holds digital shares. But Levi rejected that approach.
“No one would use a permissioned stablecoin,” he argued, highlighting the irony of restricting access to assets that aim to democratize investing. Backed’s model, instead, mimics the structure of stablecoins: xStocks act as “wrappers” for actual shares held off-chain. Think of them as IOUs for stock, not the stock itself. Holders can redeem them for real shares, albeit with a fee. “You’re not holding Tesla,” Levi clarified, “but you have a right to its economic value.”
The Swiss regulatory environment played a pivotal role. A 2020 law explicitly favoring innovation allowed Backed to operate without the bureaucratic hurdles common in other regions. Today, xStocks boast 30,300 unique holders, with Tesla’s token leading the pack at 43,000 units backing $18 million in shares. But the U.S. remains a hurdle. American regulators, including SEC Commissioner Hester Peirce, have warned that tokenization doesn’t exempt companies from securities laws. Meanwhile, firms like OpenAI have denounced tokenized products tied to them as unauthorized.
Levi isn’t deterred. He sees a parallel with stablecoins, which gained traction globally as tools to hedge against inflation. “People will use xStocks for the same reason,” he said, comparing them to a “safe and growing” alternative to volatile assets like Bitcoin. The S&P 500, he argues, could become the next frontier for tokenized investing—provided the regulatory roadblocks are cleared.
As Backed competes with platforms like Robinhood and Securitize, its Swiss base underscores a broader tension in finance: can innovation thrive without compromising compliance? For now, Levi’s team seems to have found a middle path—one that could redefine how the world thinks about ownership, one token at a time.
What do you think? Could tokenized stocks like xStocks bridge the gap between DeFi and traditional finance, or will regulatory friction stifle their potential?