Issues Triggered by SpaceX Stock Being Tokenized

Last Friday, Space X's IPO sparked a frenzy of subscriptions in the traditional stock market.

Taking this opportunity, some centralized exchanges (CEXs) in the crypto ecosystem have offered alternative ways for crypto users to participate: allowing participants to buy tokenized Space X shares.

With such a great theme as Space X as a backdrop, and holding high popularity within the crypto ecosystem, this approach by CEXs has greatly attracted attention.

I see this move as a rare opportunity in recent times to test the practical application of tokenized stocks as real-world assets (RWA).

However, many CEXs encountered a common issue in their actual operations: due to inability to acquire enough shares, they had to partially or fully refund participating users.

After this unexpected situation was exposed, another long-neglected detail was brought into focus: some of the so-called tokenized stocks listed on CEXs are not actually real stocks — they do not carry the rights inherent to stocks, such as voting rights, dividend rights, etc., but are merely tokens linked to the stock price.

Whether it's the inability to provide sufficient shares or some tokenized stocks not being genuine stocks, the core issue reflected is the same:

Many of these tokenized assets lack real rights and protections.

This issue is key to the vitality of such assets.

In my view: whether RWA can succeed depends not on technology but on whether the centralized regulatory process can be properly implemented.

If regulation is inadequate and cannot ensure that tokenized assets and the rights to the underlying physical assets they represent are equivalent, then these so-called RWA assets are just shells, and will inevitably collapse.

And once regulation is involved, ordinary users need to be prepared to handle many trivial issues.

Taking tokenized stocks as an example, let's briefly outline which parts might involve regulation.

Some US-listed companies (like Apple) pay dividends.

For cash dividends, US tax residents must pay taxes according to US law, while foreign tax residents must pay taxes according to their own country's tax regulations.

When such companies' stocks are tokenized, regulators must intervene to ensure that tokenized stocks carry the same rights.

When these companies distribute cash dividends, in what form are these dividends given to CEXs or token trading platforms?

Are they in US dollars or stablecoins? Currently, this area remains a regulatory gray zone.

If they are in cash, how do users holding tokens withdraw or receive this cash? Which bank card do they use? What tax rules should they pay attention to?

If they are in stablecoins, how should taxes be paid on cash dividends received in stablecoin form? This is also a gray area in many countries' regulations.

The above are regulatory details and tax issues that might arise under the assumption that users are legitimate.

To become legitimate users, KYC (Know Your Customer) is an essential step. Once KYC is done, users cannot avoid regulation, and many may be naturally excluded.

All of these are considerations users should carefully think about before participating.

In a previous article about listing US stocks on major exchanges, due to space limitations, I didn't share one point:

Whether CEXs can list US stock trading is fundamentally not a technical issue but a regulatory one.

Regarding the business opportunity of attracting crypto users to participate in tokenized US stock trading, I believe that besides the largest exchange, other exchanges can see it too. But why is only the largest exchange so active, while others are more cautious?

I think the key lies in regulation. Some CEXs push the boundaries boldly, while others act more cautiously.

If the definition of crypto assets still varies significantly across countries and can operate in gray areas, then stock trading is strictly regulated and scrutinized worldwide, leaving little room for gray areas.

Until regulation is fully implemented and the regulatory details are clear, users need to be aware of the risks involved when participating in such trading.