London Stock Exchange (or just LSE), one of the world's oldest stock exchanges, announced on Tuesday that it is partnering with Payward, Kraken's parent company and the developer of the xStocks framework, on a wider push into tokenized public equities.
- Under the deal, Payward plans to turn the 100 largest London-listed stocks into xStocks in the coming weeks.
- The tokenized stocks will be offered to eligible investors across more than 110 countries, though UK investors themselves will initially be excluded.
- Subject to regulatory approval, LSE separately intends to begin listing xStocks on LSE 24, its planned round-the-clock trading venue, in 2027.
A tokenized stock still may not be a stock
Tokenized stocks are supported one-for-one with underlying shares, but holders don't own those shares.
Backed Assets, the Jersey-based issuer behind xStocks, structures each token as a bearer debt instrument known as a tracker certificate rather than direct equity ownership.
- Kraken's own risk disclosure says xStocks holders "do not have ownership" in the underlying shares.
- They also receive no voting rights, distribution entitlements or legal claims on the underlying stock or residual assets if the company is liquidated.
Dividends are handled by adjusting the token balance rather than giving holders the same dividend rights that come with directly owning the stock.
That structure has allowed xStocks to travel between exchanges in ways ordinary brokerage shares generally can't.
Payward says the framework has generated more than $40 billion in total volume since launching last year.
LSE is already working on something different
At the same time, LSE is developing another model for putting stocks on-chain. The exchange said on its site its planned UK tokenized-equity structure is being designed to preserve the "shareholder rights, protections and governance standards" of conventional public markets.
It wants to explore tokens issued with the involvement of the companies themselves and serviced through regulated market infrastructure. LSE described the goal as a "rights-preserving model for tokenised public equities."
That leaves two quite different versions of a tokenized stock inside the same partnership. Payward's existing xStocks reproduce the economic performance of shares without turning token holders into shareholders. The model LSE is exploring would keep the rights attached to the underlying equity while moving ownership and settlement on-chain.