Tokenized stocks are derivatives in the form of a digital token, which are tethered to an underlying asset such as a publicly listed stock. Simply put – you can now buy digital tokens which represent shares in publicly listed companies through Binance.
In order to offer tokenized stocks, Binance has partnered with CM-Equity AG and Digital Assets AG. With this trio working in tandem, a multi-step process takes place in which,
- Traditional shares are purchased
- Shares are transferred to a custodian
- Digital tokens are created on a 1:1 bases for each share purchased
- Investors purchase digital tokens
This process involves various benefits for the investor. A few examples of these include,
Investors are not required to purchase entire shares, but only a fraction if desired.
By purchasing tokenized stocks, investors avoid the need for a broker, saving fees in the process.
With certain stocks only being available on select exchanges, they are often inaccessible to certain parts of the globe. With Binance being a global exchange, exposure to such stocks can now be attained on a broader scale.
Naturally, Binance has turned to its own stablecoin (BUSD) to facilitate both pricing and settlements of trades involving tokenized stocks.
Changpeng Zhao, CEO of Binance, elaborated on the important of tokenized stocks, stating,
“Binance serves many users around the world and we are very pleased to be able to help them participate in the equity market. Stock tokens demonstrate how we can democratize value transfer more seamlessly, reduce friction and costs to accessibility, without compromising on compliance or security. Through connecting traditional and crypto markets, we are building another technological bridge for a more inclusive financial future,”
While not securities themselves, Binance notes that these tokenized stocks will imbue the perks (dividends, capital returns, etc.) typically associated with such assets to investors.
Users of Binance are typically forward-thinking individuals, with a decent understanding of disruptive technologies like blockchain. As such, it would stand to reason that the stocks which Binance intends to support on its platform would align with the interests of this group. At launch, this support is being kicked off by none other than Tesla Inc.
While Binance has only announced one stock thus far, it should not be long until others like Apple, Amazon, and more join the fray.
“Binance will continue to respond to market demand by listing more stock tokens and launching more related features.”
First to the Table?
Although tokenized stocks are not yet commonplace among popular platforms, Binance is by no means the first to announce support for them. Years ago, now defunct DX.Exchange pioneered the idea of tokenized stocks through a digital asset exchange. It wasn’t until the end of 2020 that the idea really caught hold, with Bittrex Global announcing support for this unique offering.
With Bittrex Global having offered this capability through its own platform for months now, it should be unsurprising that its list of supported assets is far broader than solely Tesla.
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