Stock Tokenization: Opportunities and Challenges in an Emerging Investment Field

1. Introduction

Recently, stock tokenization has become a market hotspot, attracting the attention of many investors. This article will delve into the principles of stock tokenization, analyze arbitrage and investment opportunities in the current market, and provide a detailed introduction to different types of arbitrage logic, operational processes, and potential limitations to help investors better seize market opportunities. At the same time, we will also pay attention to the new opportunities for individual investors in this trend, such as fragmented trading and diversified asset allocation. Although stock tokenization brings many opportunities, it still faces multiple challenges such as technical implementation and price anchoring, and investors need to maintain rational judgment.

2. The Mechanism of Stock Tokenization

2.1 Definition

Stock tokenization refers to the process of converting traditional company stocks into tokens on the blockchain through smart contracts and custody mechanisms, making them capable of being held, traded, and combined on-chain. Essentially, it is a derivative of traditional stocks and does not represent direct ownership of the stocks, with its value and risk closely related to the underlying stocks.

2.2 Mainstream Implementation Path

Currently, there are three main implementation structures for stock tokenization:

1. Third-party custody + exchange integration: Tokens are issued at a 1:1 ratio through verification by regulatory companies and oracles. The advantages are high transparency and strong price anchoring.

2. Licensed Broker + Self-Operated Link: Provides a complete issuance, settlement, and self-custody cycle, ensuring high compliance, but with higher technical and legal complexity.

3. Contract for Difference (CFD) Structure (: Users trade contract products linked to stock prices, without involving actual equity rights, facing significant decoupling risk.

3. Arbitrage Opportunities in Stock Tokenization

Currently, we mainly focus on stock Tokens issued by third-party custodians, which have prices closely related to the underlying real stocks and relatively lower investment risks.

According to data from the platform, as of July 9, 2025, the total market value of stock tokens is $422 million, while the market value of Nvidia's stock alone reaches $3.9 trillion. This indicates that the liquidity of the stock token market is much lower than that of the traditional stock market.

Insufficient liquidity combined with time differences in trading leads to deviations between the token prices and their corresponding stock prices across different platforms and time periods, creating arbitrage opportunities. Below are three classic arbitrage strategies applied to stock tokens.

![Gate Research Institute: Arbitrage and Investment Opportunities in the Wave of Stock Tokenization])https://img-cdn.gateio.im/webp-social/moments-642fcf8d15b47779bf9673fd930fa3c9.webp(

) 3.1 Hedging Arbitrage between the Spot Market and the Token Market

Arbitrage Principle

When the token exchange and the stock market open simultaneously, if the token price is significantly higher than the spot stock price, arbitrageurs can buy the spot stock while shorting the corresponding stock token in the token market. If the price subsequently reverts, they can sell the spot stock and buy back the token to close the position, earning the price difference. The opposite is also true.

Arbitrage Operation Process

For example, at a certain point in time on July 9, 2025:

1. Nvidia (NVDA) spot stock price is $160.00; on a certain trading platform, the stock token corresponding to NVDA, NVDAX, is quoted at $160.40.
2. Buy NVDA spot stock while shorting the NVDAX stock token on the token trading platform.
3. Continuously monitor the price trends of the two markets.
4. When the prices of the two markets revert and approach $158.00, sell the spot stocks in the traditional market and cover the short position in the token market.
5. Each share completed risk-free arbitrage, with a profit of $0.22 after deducting fees.

Arbitrage Conditions

Hedging arbitrage is highly sensitive to slippage and fees, requiring quick identification of trading signals and execution of operations. It is suitable for quantitative institutions with high-frequency operational capabilities to execute at lower fees.

3.2 Price difference arbitrage of the same stock Token between different exchanges

Arbitrage Principle

Buy tokens on a low-priced trading platform and withdraw them to sell on a high-priced trading platform. If the price difference between the exchanges is large enough to still make a profit after deducting fees, then the operation can be executed.

Arbitrage Operation Process

Suppose the price of a Token on exchange A is 100 USDT, while the price on exchange B is 103 USDT. An arbitrageur can buy the Token on exchange A, then transfer it to exchange B and sell it for around 103 USDT, completing the arbitrage.

Arbitrage Conditions

Arbitrage of this kind is limited by factors such as on-chain transfer speed, withdrawal restrictions, exchange deposit times, and trading pair depth. If on-chain transfers are involved, network congestion and delays must be considered. Arbitrageurs often need to use pre-stored liquidity, quantitative trading, and multi-account collaboration to achieve "risk-free arbitrage."

3.3 Time Difference Arbitrage

Arbitrage Principle

Traditional stock settlements typically involve a T+2 or longer delay, whereas tokenized stock trading and settlement are based on blockchain, theoretically allowing for settlement in minutes or even seconds. Arbitrageurs can take advantage of the settlement time difference to arbitrage using the instantaneous price adjustments in the token market before the traditional stock settlement is completed.

Arbitrage Operation Process

1. Deploy a monitoring system or rely on news sources to capture significant news during non-trading hours.
2. Analyze the direction and magnitude of the impact of the news on the relevant stocks.
3. According to the analysis results, buy or short related stock tokens on the token platform.
4. Wait for the spot market to open to close the position, or wait for the token price to return to align with the spot price to close the position in the token market to obtain the price difference.

Arbitrage Conditions

Such arbitrage opportunities often last only a few minutes or even seconds, requiring a high-performance news delivery system and automated trading response. In addition, it is necessary to ensure the accuracy of the news sources to avoid misjudgments in investment direction due to false news.

![Gate Institute: Arbitrage and Investment Opportunities in the Wave of Stock Tokenization]###https://img-cdn.gateio.im/webp-social/moments-8f39bfc9d81f575efc7b9e0c6e8cdb30.webp(

4. Opportunities for Individual Investors

Although arbitrage strategies are usually more suitable for professional investors, there are also some opportunities for individual investors in the wave of stock tokenization.

) 4.1 Purchase fractional stocks

After the tokenization of stocks, a single stock can be divided into smaller units, such as 0.1 shares or even 0.001 shares. This allows investors to participate in high-priced stock investments with a lower capital threshold.

4.2 Diversified Asset Allocation

The全天候的交易系统 allows users to trade anytime, achieving diversified asset allocation and resisting regional financial risks.

4.3 lower trading costs

Trading tokenized stocks through decentralized trading platforms can significantly reduce transaction costs and minimize slippage for investors.

5. Risks and Challenges

Although stock tokenization arbitrage provides new opportunities for investors, there are also many risks:

• Risk of widening price spread: If the price spread does not converge and continues to widen, investors will face losses.
• Slippage risk, delay risk, and transaction fees eroding profits.
• Risks of Oracles and Price Decoupling: If a failure, delay, or attack occurs, it may cause severe fluctuations in Token prices or permanent decoupling.
• Legal challenges: In many jurisdictions, the legal status of stock tokens is unclear, which may involve risks of unregistered securities trading and cross-border flow of foreign assets.

6. Conclusion

Stock tokenization is not only a technology-driven practice of asset on-chain, but also a typical path for the crypto market to penetrate "real world assets" (RWA). This new type of asset provides opportunities for both professional and individual investors. Investors can choose different investment strategies based on their own characteristics. However, it is important to note that stock tokens also face systemic risks such as price dislocation and legal challenges, and investors need to closely monitor the security of the underlying assets and maintain rational judgment.

![Gate Research Institute: Arbitrage and Investment Opportunities in the Wave of Stock Tokenization]###https://img-cdn.gateio.im/webp-social/moments-3886d87b265f0ef9bd421256884cb58d.webp(