eToro’s Blockchain Gamble: Custom Chain and Tokenized Stocks Signal a TradFi-DeFi Clash

Fresh off its Nasdaq debut in May 2025, eToro is charging into uncharted territory with hints of building its own blockchain and rolling out tokenized stocks on Ethereum. CEO Yoni Assia is betting big on merging traditional finance with the wild world of crypto, but with regulatory hawks circling and tech hurdles looming, is this a revolutionary leap or a reckless stumble?

• Custom Blockchain Plans: eToro eyes a dedicated blockchain to manage millions of monthly transactions, engaging with four or five platforms for potential partnerships.
• Tokenized Stocks Rollout: 100 US stocks and ETFs to be offered as ERC20 tokens on Ethereum, starting with European users for 24/5 trading, aiming for 24/7 access.
• Market and Competition: eToro’s stock (ETOR) slumps to $60.93, down 24% from its peak, while rival Robinhood pushes similar tokenized securities amidst regulatory heat.

Scalability Crisis: Why eToro Wants Its Own Blockchain

eToro, a titan in the online brokerage game with a user base spanning millions, is facing a hard truth after its public listing on Nasdaq earlier this year: current blockchain networks can’t handle the heat. With millions of transactions processed monthly, platforms like Ethereum buckle under the pressure, plagued by congestion and skyrocketing fees. In a candid chat with Fortune, CEO Yoni Assia didn’t mince words about the bottleneck.

“We can’t run today the millions of transactions that we’re transacting on a monthly basis on existing blockchains.”

His solution? Explore building a custom blockchain, potentially a side chain—a separate network linked to a main blockchain like Ethereum, designed to process specific tasks faster and cheaper. While no launch date is set, eToro is already in talks with four or five undisclosed blockchain platforms for partnerships. This isn’t just about keeping up with transaction volume; it’s about future-proofing a platform that’s outgrowing the very tech it relies on. For the uninitiated, think of a side chain as an express lane on a clogged highway—built to speed things up without rebuilding the whole road.

But let’s not pop the champagne yet. Developing a blockchain from scratch is a Herculean task, riddled with technical pitfalls and massive costs. Ethereum, for all its flaws, processes around 15 transactions per second at best, while eToro’s needs likely dwarf that by orders of magnitude. Past attempts by other firms to build custom chains have often floundered—look at some of the ghost-town corporate blockchains from the 2018 hype cycle. If eToro can’t deliver, or if these partnerships fizzle, they might be stuck relying on Ethereum’s creaky infrastructure longer than planned. And with gas fees—those pesky transaction costs on Ethereum—spiking during peak times (sometimes hitting $50 or more per transaction during 2021 bull runs), the interim could be a costly mess for both eToro and its users. These scalability challenges are a well-documented hurdle in the blockchain space.

Tokenized Stocks: Bridging Wall Street and Crypto

While a custom blockchain tackles backend woes, eToro is pushing a user-facing innovation that’s turning heads: tokenized stocks on the Ethereum blockchain. Starting with 100 popular US stocks and ETFs, these assets will be converted into ERC20 tokens—a standard on Ethereum that makes them compatible with crypto wallets and decentralized finance (DeFi) apps, which are platforms for lending, borrowing, or trading without traditional banks. Initially targeting European users on a waitlist, the tokenized stocks promise trading access 24/5, with a long-term goal of full 24/7 availability. Picture this: buying Tesla shares at midnight or moving them directly to a self-custody wallet—where you, not the brokerage, hold the keys—for use in DeFi protocols. Assia sees this as a paradigm shift.

“This is really the beginning of digital assets and tokenized real-world assets.”

Tokenization isn’t just a buzzword; it’s about turning physical or traditional assets into digital tokens on a blockchain, much like transforming a paper stock certificate into a digital coin you can trade or store securely. The potential here is massive—extended trading hours shatter the 9-to-5 limits of traditional markets, and blockchain’s transparency offers a layer of trust Wall Street often lacks. eToro’s not new to this game either; they dabbled with tokenized gold and silver back in 2019, showing a consistent drive to blend traditional finance (TradFi) with crypto’s borderless ethos, a strategy that could offer significant benefits for users. Focusing on Europe likely stems from a more progressive regulatory stance there compared to the U.S., where digital asset rules are a fragmented disaster despite recent legislative pushes like the CLARITY and GENIUS Acts.

Still, skeptics might grumble, “Why mess with tokenized stocks when regular markets work fine?” The answer lies in freedom and flexibility—24/7 trading and DeFi integration unlock possibilities that stodgy brokerages can’t match. Imagine fractional ownership of high-priced stocks like Amazon, accessible to small investors, or using your tokenized shares as collateral for a crypto loan. The real-world asset (RWA) market, which includes tokenized stocks, already sits at over $21 billion, with tokenized equities alone worth $406 million per RWA.xyz data. Industry leaders like STOKR CEO Arnab Naskar predict a multi-trillion-dollar future for this space, a vision eToro clearly wants to lead with initiatives like tokenized stocks on Ethereum.

Regulatory Quicksand and Competitive Fire

eToro isn’t sailing solo in this tokenized sea. Robinhood Markets Inc. recently dropped over 200 tokenized stocks and ETFs for European clients, built on Arbitrum, a layer-2 scaling solution for Ethereum that cuts costs and speeds transactions. Both brokerages are racing to lure users with the allure of always-on trading, but the regulatory glare is fierce. Robinhood’s promotional stunts have already drawn flak in Europe, a red flag for eToro as it navigates the same waters. The European Union’s Markets in Crypto-Assets Regulation (MiCA), set to fully kick in by late 2025, offers some clarity for digital assets but still imposes strict compliance demands. Meanwhile, in the U.S., the SEC and CFTC continue their turf war over crypto oversight, likely explaining why eToro and Robinhood are testing these waters in Europe first.

Then there’s Backed Finance, another player that’s rolled out over 60 tokenized stocks on exchanges like ByBit and Kraken, showing the competition isn’t just a two-horse race. eToro’s edge might lie in its Nasdaq clout and a user base already familiar with crypto—after all, they’ve supported Bitcoin trading since 2013. But Robinhood’s Arbitrum setup could prove faster and cheaper than eToro’s reliance on Ethereum’s mainnet for ERC20 tokens, potentially swaying cost-conscious users. Execution speed will be everything in a market where first-mover advantage can spell dominance or irrelevance, especially as they navigate TradFi and DeFi integration.

Risks and Reality Checks: Don’t Buy the Hype Blindly

Let’s cut through the buzz—tokenized stocks and custom blockchains aren’t guaranteed wins. Ethereum’s scalability woes are no secret; even with layer-2 solutions like Polygon or Optimism as potential stopgaps, network congestion could frustrate users with delays or high costs. If eToro’s blockchain dream takes years—or worse, flops—relying on Ethereum for tokenized assets might turn into a PR nightmare. Market adoption is another hurdle; while crypto enthusiasts might geek out over tokenized Apple shares, mainstream investors could shrug, sticking to familiar platforms. The $406 million slice of tokenized stocks in the RWA pie is peanuts compared to traditional markets, signaling a long road to mass acceptance.

Regulatory risks loom even larger. Europe’s MiCA framework might be clearer than the U.S. mess, but it’s still a tight leash—non-compliance could halt eToro’s plans dead. And let’s not forget user sovereignty promises; if eToro touts self-custody but retains control over tokenized assets behind the scenes, it’s just TradFi in crypto clothing, betraying the decentralization ethos. From a Bitcoin maximalist lens, while BTC stands as the unassailable king of sound money and true decentralization, eToro’s Ethereum-based moves could onboard millions to crypto principles—if they don’t get mired in altcoin baggage like network hiccups or regulatory overreach. Community discussions around eToro’s blockchain development reflect similar concerns and curiosity.

On the financial front, eToro’s own stock paints a shaky picture. After peaking at $79 on June 10, ETOR has bled 24% to $60.93 as of July 30, 2025, per Bloomberg data, despite a tiny 0.35% uptick recently. That’s not exactly a ringing endorsement from investors. Whether this ties to blockchain gambles, broader market volatility, or something else isn’t clear, but a sliding stock price doesn’t scream confidence. If Assia’s vision of merging TradFi and DeFi stumbles, eToro risks alienating both Wall Street suits and crypto degens.

Broader Trends: Tokenization Beyond Stocks

Stepping back, eToro’s play is just one tile in a sprawling mosaic of asset digitization. The RWA market is exploding—InternetX tokenized 22 million domains, while BlackRock’s BUIDL fund on Ethereum brings institutional muscle to tokenized money market funds, seen by JPMorgan strategist Teresa Ho as a stablecoin rival. These experiments signal a seismic shift, potentially worth trillions, where everything from real estate to bonds could live on blockchains. eToro’s tokenized stocks, while niche now, position it as a frontrunner—if it can keep pace. But a word of caution: don’t buy the hype that this flips Wall Street overnight. Adoption could drag on for years, and eToro’s execution must match the lofty promises. For more background on their approach, check out this overview of eToro’s history.

Key Takeaways and Questions on eToro’s Crypto Push

• Why is eToro considering a custom blockchain?
  With millions of monthly transactions, existing blockchains like Ethereum can’t cope due to congestion and high fees, driving eToro to explore a side chain for efficiency and cost savings.
• What are tokenized stocks and how do they work on Ethereum?
  They’re digital versions of real-world stocks or ETFs, issued as ERC20 tokens on Ethereum, allowing 24/5 trading (eventually 24/7) and transfers to crypto wallets or DeFi apps for European users initially.
• What benefits do tokenized stocks offer eToro users?
  Extended trading hours beyond traditional markets, potential for self-custody, and integration with DeFi platforms, giving users more control and flexibility over their assets.
• What challenges could derail eToro’s blockchain and tokenization plans?
  Regulatory hurdles like Europe’s MiCA rules, Ethereum’s scalability issues with high gas fees, and slow mainstream adoption of tokenized assets pose significant risks.
• Why is eToro targeting European users first for tokenized stocks?
  Europe likely offers a more favorable regulatory environment compared to restrictive markets like the U.S., alongside strategic demand or a testing ground for broader rollout.
• How does eToro stack up against competitors like Robinhood?
  While eToro leverages Nasdaq visibility and past crypto experience, Robinhood’s Arbitrum layer-2 rollout for tokenized securities might offer faster, cheaper transactions, making speed of execution critical.
• Could eToro’s moves influence the broader crypto and finance space?
  Success could spur giants like Fidelity to tokenize assets, accelerating the TradFi-DeFi merger, but regulatory or tech failures might delay this convergence for years.

eToro is playing a high-stakes game with this dual push into custom blockchain tech and tokenized stocks. Success could redefine brokerages, blending the accessibility of crypto with the stability of traditional markets, empowering users with true asset control. Failure, though, risks tech flops, regulatory smackdowns, or simply being outrun by hungrier rivals. As a champion of decentralization, privacy, and disrupting the status quo, I’m rooting for eToro to shake things up—but not without a healthy dose of skepticism. After all, in crypto, a little chaos often sparks the biggest revolutions. Let’s see if eToro can deliver without tripping over its own ambition, especially with insights from recent interviews with Yoni Assia.