More than a quarter of the entire tokenized stock market is now made up of ETFs, a remarkable shift for a category that barely existed on-chain two years ago.
Tokenized ETFs account for 26.6% of the total market capitalization of tokenized stocks. The largest single product lives on Solana and is attributed to Ondo Finance. The trend signals that investors seeking on-chain equity exposure are gravitating toward the same diversified wrappers they trust in traditional finance.
Alpaca commands a 94% market share of tokenized US stocks and ETFs, with $480 million in assets under custody. Kraken aims to challenge that dominance with its xStocks product, currently covering around 100 tokenized US stocks and ETFs, with plans to expand to 500 by the end of 2026.
Ondo Finance's Solana-based tokenized ETF sits at the top of the category by market cap, a deliberate bet on lower fees and faster transaction finality.
The appeal of tokenized ETFs is straightforward: take a product people understand and remove the friction. Tokenized versions trade 24/7, settle almost instantly, and live on public blockchains where anyone with a wallet can participate. Each tokenized share is backed 1:1 by the corresponding traditional asset.
For institutional players, the 24/7 settlement window is crucial. Portfolio rebalancing, hedging, and arbitrage strategies become simpler when instruments never stop trading. The composability of DeFi adds dimension: tokenized ETFs can be used as collateral, staked, or bundled into complex products.
The concentration risk is significant. Alpaca holding 94% of the market creates a single point of failure that could ripple across the sector. Kraken's expansion offers hope for diversification, while the regulatory landscape remains the biggest wildcard, with the SEC's stance on securities versus commodities keeping many institutions on the sidelines.