The Resurgence of STOs: Uncertainties Behind Policy Shifts

Host: Alex, Research Partner at Mint Ventures

Guest: Mindao, founder of dForce

Recording time: 2025.3.14

Hello everyone, welcome to WEB3 Mint To Be. In this episode, we will explore the recently revived crypto narrative: STO( security tokenization), especially the tokenization of US stocks.

The Background of Coinbase Stock Tokenization

Alex: Coinbase has proposed to restart its tokenization plan. Could you outline the background and key details of this matter for us?

Minda: The tokenization of Coinbase was actually proposed back in 2020, but was shelved due to a harsh regulatory environment. In January of this year, Jesse, the head of Base, proposed deploying the Coinbase token on the Base chain, and in February, the SEC dropped its lawsuit against Coinbase, reflecting the new government's friendly attitude toward the crypto industry. The timing aligns very well with the overall changes in the regulatory environment. For the largest exchange in the United States, this move is also quite understandable.

The Value Proposition of Stock Tokenization

Alex: What is the main value proposition of STO or tokenization of stocks? What chemical reaction might it produce with existing DeFi products?

Mindaos: Stock tokenization can expand the capital pool from regional markets to global markets. But more importantly, it is about "empowering" stocks. For example, Coinbase's stock tokens can be staked on the Base chain, validate nodes, or pay gas fees, no longer just simple shareholder certificates. Similarly, Disney stock tokens can be used for ticket discounts, and Netflix stock tokens can be used for subscription offers. This empowerment is the key to the combination of STO and crypto-natives, rather than just moving stocks onto the chain.

For DeFi, stock tokens provide more upper-layer assets and liquidity for protocols. The infrastructure has become quite mature after DeFi Summer, allowing new assets to be directly accessed and utilized.

The Interaction Between US Stocks and DeFi

Alex: After a large number of US stock assets are on-chain, what interactions might occur with existing DeFi projects? Are you optimistic about this development?

Mindaos: For DeFi infrastructure, the most critical aspect is the assets carried upstream. Currently, it is mainly crypto-native assets, and if more stock-type assets come in, it would be beneficial for all underlying DeFi protocols. For example, stablecoins and treasury tokenization have brought a large amount of yield-bearing assets to DeFi. Once stocks are tokenized, they can also be directly integrated into existing infrastructures such as AMM, order books, and perpetual contracts. These infrastructures have been tested over the years and are quite mature, allowing new assets to be easily integrated.

Does STO Align with U.S. National Interests

Alex: Does the promotion of STO align with the long-term national interests of the United States?

Minda: This aligns very well with U.S. interests. As the largest stock market in the world, tokenization can greatly reduce costs for financial enterprises in the U.S., such as simplifying shareholder voting and dividend processes. Additionally, promoting U.S. stocks globally as if they were a USD stablecoin would also expand the influence of U.S. stocks. However, this may affect the interests of some traditional financial enterprises, so pushing it forward is not straightforward.

Obstacles to Stock Tokenization

Alex: Besides the type of stocks, what are the other main factors hindering the development of stock tokenization products?

Mindaos: The reputation of the issuer is very important, and users need to believe that the underlying tokens can ultimately be redeemed. Additionally, there needs to be sufficient support from market makers to ensure liquidity and price stability. Moreover, if it is only used as a fund pool for crypto users to buy US stocks, the demand may not be very large. The key is to have a design that expands the rights and increases the use cases for the tokens.

Factors Behind the Revitalization of STOs and Market Performance Expectations

Alex: Besides the shift in regulatory policies, what other factors have led to a renewed interest in the STO sector? How do you view its market performance in the next 1-3 years?

Mingdao: The core issue is that the market structure has changed. Previously, it was mainly crypto-native users, but now there are more and more non-crypto users entering through stablecoins. These users have a demand for allocation in traditional assets. If it becomes convenient to trade U.S. stocks on-chain, the demand will still be significant. Currently, the tokenization of U.S. stocks is still in the early stages, but as long as there is a compliant framework, a certain scale of market should be formed within 3-5 years.

Beneficiaries of the STO Wave

Alex: In the long run, which sectors' projects or companies can benefit from the STO wave?

The public opinion: The biggest beneficiaries should be the asset issuers, especially those who can quickly form scale and network effects. Just like the stablecoin USDT, once a liquidity network effect is formed, it is difficult to replace. The underlying can also be used for financing and margin trading, and many business models can be established. As for which chain the issuance will take place, it may be similar to USDT, issuing where there is demand.

How to view the current policy environment of the cryptocurrency industry

Alex: What do you think of the current policy environment in the cryptocurrency industry? What key events should we pay attention to in the future?

Min Dao: My feelings are quite complex. There are indeed many favorable policies, the degree and speed of which exceed expectations. However, some actions by the Trump family raise concerns, such as issuing tokens and the World Liberty project, which seem to suggest a suspicion of misuse of public resources. This could lead to drastic fluctuations in future policies. The key is to see how many policies can be truly solidified into laws over the next four years, rather than just remaining at the level of executive orders. Overall, the policy benefits are evident, but there is significant uncertainty behind them.