Kraken co-CEO Arjun Sethi told The Block on May 7 that tokenized equities will not immediately unlock large-scale institutional adoption, pushing back against the prevailing narrative that real-world asset tokenization is primarily an institutional play driven by banks and major asset managers. Sethi identified fintech companies and retail investors in emerging markets as the primary drivers of near-term demand, a view that aligns closely with on-chain data and Kraken's own product footprint.

Tokenized equities are blockchain-based tokens that track the price of publicly listed stocks or ETFs. They trade around the clock on crypto infrastructure and can be used as collateral in decentralized finance (DeFi) protocols, unlike traditional shares held through a brokerage. Importantly, most tokenized equity structures, including xStocks and comparable products, represent synthetic price exposure only and do not confer shareholder voting rights or dividend entitlements. Kraken launched its own product in this category, xStocks, in June 2025, developed in partnership with Backed Finance. Built on the Solana network as SPL tokens, xStocks offer 1:1-backed exposure to U.S.-listed securities. The product operates under Regulation S, an SEC framework that exempts offshore offerings from domestic registration requirements, making it available in more than 110 countries outside the United States.

By early 2026, xStocks had reached 100 available equities and surpassed $25 billion in cumulative transaction volume. Kraken has set a target of 500 equities by the end of the year. Despite that activity, the broader tokenized equity market remains a small portion of the on-chain real-world asset (RWA) landscape. According to CoinGecko's Q1 2026 RWA report, tokenized equities held roughly $500 million in market capitalization, representing about 2.5% of the total $19.3 billion RWA market. Cornell Business Review data traces the same category growing approximately 50 times over the course of 2025, from under $30 million to more than $700 million, underscoring how quickly the sector has scaled even from a small base. Tokenized U.S. Treasuries still dominate, accounting for 67.2% of on-chain RWA assets. Spot trading volume for tokenized stocks reached $15.1 billion in Q1 2026, a figure that reflects genuine user activity even as market capitalization lags.

Sethi's caution about institutional timelines reflects real structural friction. Large financial institutions such as pension funds, banks, and insurance companies face unresolved compliance questions around custody standards, asset classification, and reporting requirements. The DTCC, the central U.S. clearing house, only began issuing digital twin blockchain records of U.S. equities in 2026. Regulatory clarity across most jurisdictions remains incomplete, and the legal risk of operating at scale in an unsettled framework keeps major TradFi players on the sidelines. "Right now, we're at what I call the infrastructure phase," Sethi said in a March 2026 interview with Fortune. "Once that infrastructure is in place, which is what we're betting on, then the user experience evolves very quickly."

The more immediate story is access. Equity market participation rates in emerging economies sit between 5% and 15% of adults, compared to 55% to 62% in the United States. Capital controls compound the problem: India caps annual overseas investment at $250,000 per person, Brazil requires regulatory approval for large transfers, and China limits outbound investment to $50,000 per year. Legacy banking infrastructure adds settlement delays and correspondent banking fees on top of those restrictions. A retail investor in Nigeria, Pakistan, or Bangladesh who wants exposure to U.S.-listed equities has historically needed a foreign brokerage account, a currency conversion, and in some cases regulatory sign-off. For eligible users who complete Kraken's identity verification and anti-money-laundering onboarding, a crypto exchange account and a smartphone collapse most of those steps. "What they want at the end of the day is what Citadel and Jane Street have, or JPMorgan has, and they want it accessible to them," Sethi said at the Semafor World Economy Summit in April 2026, as reported by Fortune.

Africa illustrates the asymmetry in this market particularly clearly. Nigerian equities returned 57% and Egyptian equities returned 59% on MSCI indices in 2025, both well ahead of the MSCI Emerging Markets Index aggregate return of 33.6% and the S&P 500's 17.9% gain. Yet African investors have limited on-ramps to global equities, and global investors have equally limited access to African markets. Every tokenized equity currently available is a U.S.-listed security. No major exchange has yet tokenized a Nigerian bank, a Kenyan fintech, or a South African mining company for global distribution. That gap is simultaneously the sector's largest structural gap and its greatest untapped opportunity. Nigeria's Securities and Exchange Commission established a regulatory sandbox for virtual asset providers in 2023 and formally recognized digital assets as securities under the Investments and Securities Act of 2024, giving it one of the more developed frameworks for tokenized products in the region. South Asia presents a parallel demand story: currency instability in Pakistan and Bangladesh is driving appetite for dollar-denominated asset exposure, and India's mature UPI payments infrastructure offers a natural distribution channel, yet India's regulatory stance on crypto remains cautious and the classification of products such as xStocks as securities or derivatives is unresolved under Indian law.

Kraken's position in the broader financial system has strengthened as this product category grows. In March 2026, it became the first crypto firm to secure a Federal Reserve master account, obtained through its Wyoming-chartered bank. The company has also filed a confidential IPO with the SEC, confirmed by Sethi at the Semafor summit, a step that would give public market investors direct exposure to the exchange's expanding product portfolio. According to Cornell Business Review, citing a Citigroup projection, the tokenized securities market could reach $4 trillion to $5 trillion by 2030, a figure that would require institutional participation at scale. For now, the growth is coming from somewhere else entirely.