If you're reading this and still haven't signed up, click the subscribe button below!

This week Simon Taylor & Cuy Sheffield are joined by:

🎙️ Listen to the latest episode of Tokenized here. 

📷 Watch on YouTube here.

Cross-Border Is the One Stablecoin Bet Banks Can't Lose

Zelle has 150 million users, 2,400 member banks, and $1.2 trillion in annual domestic volume. It just launched ZLUSD, a dollar-backed stablecoin, alongside a separate India expansion. The two announcements landed in the same press release but are distinct: India will launch without the stablecoin, at least initially.

The strategic logic is clean. Cross-border remittances expand Zelle's addressable market without touching domestic deposits - the one business case where stablecoins don't threaten banks' core funding. "The big banks have woken up to the fact that these crypto rails pose an existential threat," Ross said. "We're entering a new phase where the big banks are going to be launching products on crypto rails." That choice looks less generous set against the CLARITY Act fight, where the same banks are lobbying to block non-bank issuers from passing yield through to holders.

Eli's point cut to the operational advantage banks hold over Tether in this market. Banks can embed FX conversion directly into the remittance - the way Visa and Mastercard handle dynamic currency conversion on cross-border card transactions. Tether can move dollars; banks can deliver pesos, rupees, or Philippine pesos at the point of receipt.

Cuy added historical context. Zelle had significant unauthorized adoption in Venezuela around 2021, where people shared US-based Zelle accounts to pay each other in dollars - a proto-stablecoin use case against Zelle's own terms of service. ZLUSD takes that latent demand and formalizes it.

Put Zelle's stablecoin play next to The Clearing House building tokenized deposits for wholesale B2B transfers, and a pattern emerges - different instruments for different use cases. Simon's read is that bank consortia can out-execute startups when the incentive structure aligns. Zelle is the proof.

The CLARITY Act Turns Yield Into Card Rewards

Rain launched Rewards, a native loyalty capability for stablecoin card programs, built on infrastructure from its 2025 acquisition of Uptop. The tokenized onchain points are called Raindrops.

The bigger story is regulatory. Cuy connected it to the CLARITY Act's yield compromise: issuers barred from paying passive yield on stablecoin balances can still fund activity-based rewards on card spend. "You could end up in a world even in the US where you have a debit card that pays you two or 3% back," Cuy said. "We haven't seen that."

That pool of yield - issuer returns that can't be paid passively but can flow into transaction-based rewards - creates a structural incentive for stablecoin wallet providers to invest in loyalty infrastructure. In the US, 90%-plus of credit card spend runs on rewards cards. Without a rewards program, a stablecoin card isn't competitive.

Sweep Mechanics and the Loyalty Endgame

Eli pointed to a parallel mechanism - the sweep into money market funds that broker-dealers already use. Centrifuge has a tokenized US Treasury fund that accepts stablecoin subscriptions and pays stablecoin redemptions. That same architecture could sit behind any stablecoin wallet, giving holders yield through a fund wrapper rather than on the stablecoin itself. Some rewards structures could be more tax-advantaged than plain interest, he noted - and flagged an emerging idea around charitable institutions issuing stablecoins where yield flows as a tax-deductible donation.

Ross's longer-term play is a centralized liquidity facility across Rain programs, letting tokenized points interoperate. A small fintech's onchain loyalty point becomes more useful inside the Rain network than it would be alone. The vision extends to stablecoin co-brand cards with consumer brands - sports teams, entertainment brands- that have massive global audiences and no direct monetization channel today.

SpaceX Broke Tokenized Stocks. Now What?

The SpaceX IPO became the first large-scale stress test for tokenized equities distribution. It did not go well. Binance Wallet, Bybit, and Bitget canceled pre-IPO offerings and refunded customers after xStocks, Kraken's tokenized equities business, failed to deliver the underlying shares. Kraken's own users received a fraction of what they requested. Over $1 billion in customer orders went unfilled, according to CoinDesk.

Eli identified two structural problems. First, an expectation gap: in TradFi, broker-dealers provide pages of risk disclosure and suitability checks before a pre-IPO SPV purchase. On crypto exchanges, buyers got none of that. "You're buying something that you maybe don't understand," he said.

Second, concentration risk, and not where most people placed it. "Alpaca is 100% of the market," Eli said, referring to the broker-dealer layer behind xStocks and its distribution partners. Every exchange offering those wrappers routes through a single allocation. Fidelity and Schwab each got their own SpaceX IPO allocation; Alpaca got one too, but it was the sole allocation serving the entire crypto wrapper market. The xStocks team needs to diversify across more broker-dealers, but few want to work in this space. Meanwhile, Bybit, Binance, and OKX face a separate problem: they're relying on a competitor's product - xStocks is now owned by Kraken - to serve their own users.

Four Models, One Modernization Problem

Eli mapped the current market onto the SEC's tokenized securities guidance, breaking it into four models:

The deeper legal challenge sits below the SEC entirely. Securities rights in the US are property rights governed by state law through UCC Article 8, which hasn't been adapted to tokenized form across any US jurisdiction. "It's going to take us at least 10 years to get to some sort of convergence," Eli said, "where the UCC is amended, the SEC is on board, and people can do a full IPO in 100% tokenized form."

The IPO process serves insiders; accredited investor laws exclude non-wealthy participants; companies stay private longer. "For the ordinary American, your first shot at SpaceX stock is at a $2 trillion valuation," Ross said. The broken system creates an opening for blockchain-based capital access - Rain's own infrastructure is built for digital assets broadly, and Ross sees a future where consumers store wealth in tokenized stocks and spend it anywhere major credit cards are accepted.

Stablecoins took years to move from "anyone could create anything they called a stablecoin" to GENIUS Act compliance standards. Equities are more complex. Whether the market converges on one model or stays fragmented across four is the question that will determine how retail investors experience tokenized stocks over the next decade.

Meanwhile, derivatives found their own answer. Hyperliquid (a decentralized derivatives exchange) ran a SpaceX perpetual contract that did $1.4 billion in volume - synthetic price exposure without the ownership question. Coinbase announced tokenized stocks described as "real one-to-one actual tokenized shares," though Eli noted the company hadn't released details on the underlying structure. Simon read it as competitive positioning against Robinhood's SPV-based model. Coinbase hasn't confirmed the underlying structure, so that interpretation remains speculative. The market structure is diverging before it converges. Separately, the SEC's move to eliminate Rule 611 - the rule that requires brokers to route orders to the exchange with the best displayed price - removes one of the regulatory barriers that kept tokenized equity platforms offshore. Without Rule 611, tokenized venues no longer face the same obligation to interoperate with incumbent exchanges, which lowers the compliance bar for re-entering the US market.

This episode lands at a specific inflection point. Stablecoin use cases (cross-border payments, card rewards, sweep mechanics) now have regulatory frameworks, institutional distribution, and working products. Tokenized equities have demand that outstrips supply, a legal stack that hasn't been modernized since the 1970s, and a broker-dealer market that's a single point of failure. The distance between those two positions is where the next three to five years of institutional effort will concentrate.

Thanks so much for reading the Tokenized Newsletter!

Please share this edition or share it with your colleagues if you enjoyed it!

Disclaimers