Backed Finance’s Strategic Move to Switzerland
Backed Finance has made the strategic decision to base its operations in Switzerland, co-founder Adam Levi revealed, citing the country’s favorable regulatory environment as a key factor. This move allows the firm to offer its version of digital assets, known as xStocks, which are the tokenized representations of popular equities such as Tesla and Nvidia.
Innovative Tokenization Model
Unlike traditional tokenized stocks that often rely on restrictive whitelists to govern who can hold them, the Swiss framework enables Backed Finance to provide a more accessible model for users.
In Levi’s view, the option of issuing what he termed ‘permissioned’ tokens—which would limit access based on a whitelist—is unappealing. He shared that after consulting legal experts within five different jurisdictions, he came to the conclusion that such restrictions would hinder adoption and user engagement.
“I told my lawyers, ‘No, I don’t want that. If I can’t offer it freely, then it’s not worth building,'” Levi recounted during an interview with Decrypt.
Understanding xStocks
xStocks are designed to simplify the process of owning stock equivalents. While many forms of tokenized stocks are considered “native,” granting holders the same rights as traditional stock investors, xStocks function more as digital wrappers around off-chain assets. As Levi explained, these tokens signify a claim to the economic value of the underlying stocks rather than direct ownership. Users can redeem xStocks for actual shares, although this involves an associated fee.
Market Reception and Regulatory Landscape
Currently, the xStocks offering has attracted about 30,300 unique holders, with Tesla representation being particularly popular, linking to about $18 million in Tesla shares in tokens. Importantly, the framework that governs these token offerings stems from a progressive legislative act passed by the Swiss Parliament in 2020, which aims to encourage financial innovation.
While the U.S. regulatory landscape for tokenized assets remains uncertain—with SEC officials emphasizing that regulation of securities still applies—Levi remains optimistic about the global potential of xStocks. He draws parallels between current trends in stablecoin usage and his vision for xStocks, suggesting that, similar to how many have sought refuge in stablecoins amid inflationary pressures, investors might gravitate towards tokenized equities as a safer investment alternative to volatile cryptocurrencies like Bitcoin.
Future Prospects
Thus far, xStocks are not available for American investors, but Levi sees promise in their appeal elsewhere, stating,
“The S&P 500 offers a stable growth option, and I believe this opportunity will resonate with people seeking security in their investments.”
