The Determinants of Trading Activity in Tokenized Equity Markets: Legal Design and On-Chain Performance

Abstract

Tokenized equities, on‑chain representations of conventional stocks and ETFs, are marketed for 24/7 access,
fractionalization, and DeFi composability. Yet whether these instruments actually behave like their off‑chain counterparts
remains unclear. Prior work catalogs legal wrappers and notes thin liquidity but does not quantitatively link structural
design to observed trading outcomes. We address this gap by assembling and analyzing 106 tokenized equity products
listed on RWA.xyz, integrating legal, technical, and on‑chain data into a single panel. Prospectuses and SEC/EDGAR filings
were parsed and cross‑referenced with blockchain data (Etherscan, Arbiscan, Solscan) to classify each token’s legal
wrapper, jurisdiction, peg mechanism, redemption terms, and transaction activity. We computed concentration and
transfer-frequency statistics, NAV-alignment indicators, and ownership dispersion, then used panel regression methods
with issuer fixed effects to analyze relationships between structural features and trading patterns. From this analysis, a
clear pattern emerges: a single issue (Exodus) accounts for ≥60% of aggregate value, skewing concentration measures,
while Dinari lists 347 products but contributes <1%, evidencing breadth without depth. Most tokens exhibit ≤10 transfers
per month, confirming a buy‑and‑hold profile rather than continuous secondary trading. Jurisdictional choices are uneven
(≈38% Swiss SPVs, 24% U.S. Trust/Reg S, 13% Liechtenstein SPVs), illustrating regulatory arbitrage. Although ≈87% assert
fully backed, 1:1 pegs, independent audits are rare and redemption rights differ sharply across issuers; these frictions
align with the absence of meaningful price discovery. Overall, enforceable redemption rights and transparent custody, not
tokenization alone, are prerequisites for genuine, continuous price discovery and liquid secondary markets in tokenized
equities.