What You Buy on a CEX Isn’t Really U.S. Stocks: Unpacking 94% Clearing Monopoly and the Evaporation of Equity Through Five Layers of Intermediation

Original Authors: Ethan, Xinyang, IOSG

In 2026, CEXs intensively launched US stock trading products, creating a booming narrative at the forefront of the industry about "seamlessly buying NVIDIA with USDT." However, peeling back the slick trading interface to examine the legal relationships and clearing processes behind it reveals that this is far from a simple "RWA asset revolution." Instead, it is a complex game of interests involving spot pricing, ownership attribution, and underlying custody monopolies.

TL;DR

• Three Divergent Paths: The routes for US stock products on crypto exchanges have diverged into three parallel paths: Traditional API, Tokenized, and Perpetual Contracts.
• Tokenized Model Highly Dependent on Alpaca: Alpaca monopolizes 94% of tokenized US stock clearing, posing a risk from the time gap between on-chain real-time operations and off-chain T+1 settlement, with the ultimate implicit costs and black swan liquidity gaps borne by users.
• Tokenized U.S. Stocks Market Remains in Blue Ocean Phase: Asset scale expanded approximately 15 times within 10 months, showing early DeFi collateral potential, while the traditional API route is rapidly diverting capital.

The Three Divergent Paths for US Stocks

In terms of capital flow, asset form, and most fundamentally, legal relationships, the US stock trading products available on current CEXs do not belong to the same category. Beneath the highly homogenized front-end trading interface, they have diverged into three completely different evolutionary paths based on differences in underlying assets and legal structures:

The coexistence of these three models is not a product design choice made overnight. Instead, it is the result of the on-chain ecosystem's continuous compromise and iteration over the past few years, balancing on-chain liquidity efficiency against traditional compliance and clearing friction.

Early Exploration and Liquidity Limitations of Offshore Tokenization

The starting point of this track dates back to the period between 2021 and 2024, with early attempts at on-chain asset tokenization (Tokenized Securities) represented by projects like Backed Finance (xStocks) and Ondo Finance. The core business of this phase involved establishing Special Purpose Vehicles (SPVs) in offshore jurisdictions. By fully collateralizing real stocks off-chain, they minted corresponding tokenized certificates (e.g., AAPLx) on-chain. These assets possessed the native characteristics of crypto assets, allowing them to be transferred to Web3 wallets and traded permissionlessly on-chain, successfully proving the paradigm for bringing assets onto the blockchain from scratch.

However, during the window period before traditional financial clearing giants substantially entered the crypto ecosystem, this model exhibited severe supply-side scarcity and scale limitations. Due to the lack of underlying liquidity support from mainstream centralized exchanges (CEXs), these tokenized assets could only circulate among a few decentralized protocols or second-tier platforms. Consequently, the total value locked (TVL) for the entire track remained low for an extended period, with the total on-chain US stock market size remaining under $100 million as of August 2025. This characteristic of "having asset mapping but lacking transactional friction efficiency" inevitably relegated early tokenized US stocks to low-liquidity accumulation on-chain, failing to truly reach mainstream retail traders.

Synthetic Perpetual Contracts: Pure Price Derivative Gaming

To compensate for the liquidity shortcomings of spot tokenization, US stock/ETF perpetual contracts quickly became market protagonists. In September 2025, Bitget pioneered the offering of US stock perpetual futures, rapidly expanding the underlying assets to over 40, with cumulative trading volume surpassing $15 billion. However, the real catalyst for the track was Hyperliquid's launch of HIP-3 (a permissionless perpetual contract deployment mechanism) on October 13, 2025, which fully activated the 24/7 equity derivatives market. As of June 2026, the total open interest (OI) for US stock-related perpetual contracts has exceeded $2.25 billion. Hyperliquid dominates this share thanks to HIP-3, with its Nasdaq-100 (XYZ100) and S&P 500 index perpetuals holding OI of over $310 million and $340 million, respectively.

Binance also aggressively followed suit in early 2026, capturing over 56% of the CEX market share in the RWA perpetual space. Its Pre-IPO derivatives like SpaceX (SPCX) have seen peak single-day trading volumes reaching billions of dollars. Additionally, Binance's Korean stock perpetual futures (Samsung, SK Hynix, Hyundai), launched in early June 2026, recorded a cumulative trading volume of approximately $470 million in their first week, with SK Hynix contributing over 90% and frequently seeing daily volumes exceed $100 million. This demonstrates retail leveraged traders' strong interest in globally hot assets like AI semiconductors. This highlights a major advantage of crypto perpetual contract platforms: the ability to quickly integrate international hot assets that traditional brokers often find difficult or inadequate to service, providing global retail investors with timely leveraged trading channels.

These synthetic perpetual contracts do not involve any actual off-chain stock delivery. They rely entirely on oracle price feeds for real-time pricing and facilitate long-short competition within the crypto exchange itself. This design offers extremely high capital efficiency and continuity, especially providing efficient price discovery and liquidity during US market holidays. In contrast, real tokenized spots, due to the need to interface with traditional T+1 clearing, custody, and underwriting processes, often exhibit significant liquidity gaps, high slippage, and price distortion on-chain. This ironic situation where "derivative pricing efficiency surpasses that of the spot" has become a structural pain point difficult for the current tokenized stock model to overcome.

Traditional API Model: Exchanges Reverting to Internet Brokerages

Entering 2026, despite the U.S. Securities and Exchange Commission (SEC) pushing forward frameworks like "Project Crypto Innovation Exemption" aimed at providing regulatory sandboxes for digital assets, the path to full legal qualification and comprehensive compliance for native on-chain securities (Tokenized Securities) faces uncontrollable delays. As a result, mainstream exchanges began looking towards a more pragmatic path. In June 2026, Binance officially announced a deep partnership with the U.S. licensed self-clearing broker Alpaca to launch US stock and ETF trading services.

This "Traditional API Routing Model" is essentially an extension of traditional retail brokerage architecture onto the front end of a crypto exchange. Through its associated broker Nest Trading routing, blockchain technology plays no settlement role in the entire lifecycle of the product. A user's holdings are merely a digital data mapping within the exchange App; orders are ultimately executed on the NYSE or NASDAQ, and the underlying securities are custodied in an Alpaca account.

The cost of this model is sacrificing all native characteristics of crypto assets: stocks cannot be withdrawn to a Web3 wallet, cannot be transferred on-chain, and certainly cannot be moved across platforms. The user's "holdings" are just a digital representation in the exchange App. However, its underlying logic is the most robust. The user is legally the "Beneficial Owner" of the securities, entitled not only to full dividends and nominal voting rights but also to the legal protection of the Securities Investor Protection Corporation (SIPC). This may seem like a compromise or regression for a crypto exchange, but it is currently the only path that allows users to truly "own" the stock.

Exchanges' Multi-Track Parallel Approach

Looking at the current mainstream US stock product lines, a deeper industry consensus is emerging: most leading exchanges are not placing all their bets on a single path. Instead, they adopt a multi-model parallel product layout. For example, platforms like Binance, Bitget, and Bybit often simultaneously operate multiple underlying systems, including traditional API routing, tokenized assets, and synthetic perpetual contracts. This multi-track parallel design is not product redundancy. The core reason is that it allows them to cater to the actual needs of different customer groups within the crypto ecosystem. High-frequency speculators value the high capital efficiency and leverage offered by synthetic contracts, while large, long-term allocators (whales) place greater value on the compliance assurance and SIPC legal protection offered by the traditional API model.

This hybrid layout is also a hedging strategy for exchanges against regulatory uncertainty. The traditional API model leverages and compromises with the existing Web2 securities compliance system. The Tokenized model pushes the boundaries of RWA innovation in offshore jurisdictions. Synthetic derivatives purely digest risk within the crypto internal network. By preparing multiple channels, exchanges can flexibly adjust their product focus based on the regulatory policies of different regions, thereby diversifying political risk.

Architecture Layers: Rights Stripped Away Across Five Layers

To understand the essence of the dilution of on-chain US stock equity rights, one must look away from the sleek front-end experience and audit downwards along the data pipeline. The root of the difference lies not in the token name or on-chain narrative, but in the number of intermediary layers stacked between the end-user and the ultimate underlying asset.

The reason the traditional API model can fully preserve shareholder rights is that it follows a very clean Web2 three-tier architecture:

User → Broker → Depository Trust & Clearing Corporation (DTCC)

In this path, the broker acts merely as a conduit. The law directly extends ownership protection through to the end-user, ensuring their legal status as a "Beneficial Owner."

However, the Tokenized model, in its attempt to forcibly "bring stocks on-chain," introduces multiple nested intermediaries into the architecture. It is forced to lengthen into a complex five-tier structure:

[End User] ──> [Crypto Exchange] ──> [Token Issuer] ──> [Intermediary Broker (Alpaca)] ──> [DTCC]

This increase in layers is by no means a harmless engineering cost; it represents a high-frequency consumption of asset rights during transmission. Within this structure, each layer intercepts or distorts the legal rights originally belonging to the shareholder.

Voting Rights: Idling and Evaporation

At the foundation of the traditional securities system, the underlying shares of all US stocks are registered under DTCC's nominee name, Cede & Co. Participants like Alpaca or Apex hold these shares on the level of beneficial ownership. This means corporate actions, such as shareholder meeting notices and voting guidelines, are only sent down the traditional clearing network to licensed brokers like Alpaca.

When the architecture stretches to five layers, the chain of rights transmission breaks directly here. As a standard broker, Alpaca's legal obligations and system interfaces only connect with its direct clients – the token issuers like Backed Finance or Ondo. Alpaca has no legal obligation to develop a complex voting rights pass-through system for these crypto entities.

The issuer layer simultaneously faces a systemic vacuum in both technology and compliance. They fundamentally lack the infrastructure to map the daily voting decisions of potentially thousands of underlying shares on-chain to token holders in real-time and securely. The result is that voting rights cease transmission at the bridging broker layer and entirely idle and evaporate at the issuer layer.

Dividend Redistribution and Contractualization

Unlike the direct disappearance of voting rights, dividends – the most attractive economic right – evolve into an indirect, repackaged distribution mechanism within the complex five-layer structure.

When a company like Apple or Nvidia pays a cash dividend, the US dollars first flow into Alpaca's account. After deducting applicable taxes, Alpaca disburses the funds to the nominal account holder – the token issuer. From this moment, the funds leave the jurisdiction of securities law and become the issuer's corporate assets. Whether on-chain token holders receive the money, and in what form, depends entirely on the contractual agreements and operational procedures established by the issuer in its offshore jurisdiction.

In practice, to circumvent the complex cross-border clearing and securities regulatory risks associated with directly distributing US dollars, mainstream projects like xStocks and Ondo commonly adopt an "automatic reinvestment" mechanism. After receiving cash dividends off-chain, they automatically reinvest them in the secondary market to purchase more underlying shares. This increase in value is then reflected non-intuitively in the user's token balance or token price by adjusting the on-chain smart contract's multiplier or the Net Asset Value (NAV) price of the token.

Currently, only a very few platforms like Bitget Reality attempt to distribute dividends directly on-chain in the form of USDT. However, neither of these models constitutes the shareholder dividends granted to you by securities law. Instead, they represent a contractual claim you hold against an offshore token issuer, dependent on the proper functioning of its technical nodes.

SIPC Protection Failure

The most critical hidden danger in the five-tier architecture lies in the legal vacuum during extreme risk events. In the traditional US securities market, SIPC provides brokerage clients with up to $500,000 in bankruptcy protection. This is the bedrock of trust that allows retail investors to entrust their assets to emerging brokers.

However, in the Tokenized model, Alpaca's direct client on its books is the SPV registered by Backed, Ondo, or Bitget in the Cayman Islands or Seychelles, not each individual user on the chain. This means SIPC's protective umbrella can, at best, only cover the "token issuer" layer.

If Alpaca itself faces a liquidation crisis, the issuer might potentially file a claim with SIPC as a client. But if the token issuer itself goes bankrupt, absconds, or suffers a hacker attack, the protective umbrella of traditional securities law becomes completely ineffective. Within the current bankruptcy and securities legal systems, there is no clear legal precedent supporting the "pass-through" of SIPC protection to an on-chain end-holder who holds a Solana SPL token on one hand but has no record in the securities system on the other.

This harsh legal reality is frankly disclosed in the official compliance documents of major issuers. Ondo Finance's legal terms state explicitly: the token provides an economic exposure to the performance of the underlying assets; the holder does not have the right to hold or receive the underlying assets.

This clearly defines the ultimate physical reality of on-chain US stocks: You are not the owner of the stock; you are the holder of a digital promissory note issued by an offshore entity, tracking the price of the US stock.

Potential Risks Under US SEC Compliance and Regulation

Within the nested multi-layer intermediary framework of the five-tier architecture, a risk event does not follow the payout path of traditional securities law. Instead, it is directly constrained by the compliance game between the offshore SPV and the upstream clearing broker. When regulatory bodies like the U.S. SEC conduct a look-through enforcement action against cross-border securities tokenization, the potential default and risk transmission path typically presents three distinct stages:

First, to mitigate compliance and reputational risk, the upstream licensed self-clearing broker usually chooses to sever the API route with the offshore SPV. Without an actual off-chain clearing and settlement channel, the offshore issuer's on-chain smart contracts will be forced to halt all minting and redemption functions.

Second, because anonymous on-chain addresses lack compliant entitlement records within the traditional securities settlement system (DTCC), SIPC's bankruptcy protection umbrella will stop entirely at the issuer entity level. It cannot pass through to protect the end-holders. In the event of the issuer's bankruptcy, the tokens held by users face the risk of default, with no recourse to recover the underlying assets.

Faced with this legal gap, the current path for on-chain tokenized US stock spots is gradually evolving towards a contractual trust structure. Platforms represented by Ondo Finance are progressively moving away from the primary form of pure SPV mapping, embracing a more structurally rigorous off-chain compliant trust fund architecture. This formalizes dividend distribution and liquidation rights through contractual means. While unable to bypass regulatory friction entirely, this design maximizes the retention of legal creditor status for holders within traditional financial courts. It is currently the best solution for this model to combat the legal vacuum.

On-Chain Financial Clearing Giant: Alpaca's Single-Point Monopoly and Liquidity Gap

Dissecting the pipelines of all current tokenized US stocks and traditional API trading products within the five-tier architecture reveals a startling fact: the entire underground network connecting crypto to US stocks converges at a single point in the most critical execution and custody layer – Alpaca.

Whether it's on-chain RWA specialists like Ondo Finance and Backed Finance (xStocks), an exchange-backed product like Bitget Reality, or even Binance's traditional US stock trading launched in June, the underlying asset purchase, clearing, and securities custody are exclusively handled by Alpaca. According to an official announcement by Alpaca on December 4, 2025, Alpaca monopolizes over 94% of the clearing and custody market share for currently tokenized US stocks and ETFs (Source: Alpaca Official).

Why Alpaca: Self-Clearing Qualification and the "Risk Aversion" of Traditional Brokers

This highly concentrated single-point monopoly is not because Alpaca offers unique, irreplaceable Web3 cutting-edge technology. Instead, it is determined by the extreme scarcity on the traditional finance supply side and the inherent compliance gap.

Within the U.S. securities system, brokers have a strict hierarchy. One category comprises a vast number of Introducing Brokers, who can only take orders and must outsource clearing, settlement, and custody to third parties. The other is the rare few Self-Clearing Brokers. Alpaca belongs to the latter. It is a formal member of DTCC, OCC, and FICC, capable of independently completing the entire chain from order execution to final asset registration. For crypto asset issuers, connecting to Alpaca means they don't need to separately interface with cumbersome execution, clearing, and custody institutions; one broker provides the full suite of services.

Alpaca's core barrier is that other traditional large licensed institutions are generally unwilling to cooperate with offshore crypto exchanges due to compliance and reputational concerns. Giants like Interactive Brokers, with market capitalizations in