On-Chain Brokerages Struggle with Compliance and Revenue
On-chain stock trading platforms, including brokers and exchanges, are becoming increasingly popular in the crypto market. These platforms combine traditional stock exchange features with blockchain technology to offer users a new way to trade stocks. However, as one industry representative noted, 'underlying assets are the prerequisite and foundation for whether the spot business of stock tokenization platforms can succeed.'
StableStock founder Zixi shared his experience in entering the on-chain brokerage market. He explained that packaging off-chain stocks into on-chain stocks is a distinct path from settling on-chain stablecoin assets off-chain to purchase stocks. StableStock's business model combines diversified products, including 'off-chain asset packaging and settlement (with securities-side clearing handled by licensed partners) + on-chain tokenized asset trading + fee arbitrage-style wealth management.'
Compliance licenses are a significant hurdle for entry into the on-chain brokerage market. Zixi noted that compliance qualifications related to stock tokenization and on-chain stock trading fall into two broad categories: securities licenses approved by mainstream market regulators, such as the US SEC and FINRA, or registration-type qualifications from regional regulators. StableStock has completed US MSB registration and New Zealand FSP registration but still requires higher-tier authorization in mainstream markets like the US.
On-chain brokerage is not an easy business to run due to compliance costs, including license application fees and human resource expenses such as external lawyers and internal compliance teams. The 'trading fee' model is a common revenue source for CEXs and on-chain perpetual platforms, but some platforms like StableStock are choosing the 'value-added services' path, offering trading fees, conversion fees, interest and liquidation fees from leveraged trading, and wealth management-related fees.