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Have you ever wanted to own stock in companies like Facebook, Google, or even Netflix, but do not have access to such assets? This is about to change for a large portion of Bittrex Global clients, as the United States based digital asset exchange has just made an interesting announcement – It now supports and offers ‘tokenized stocks’.
A tokenized stock is not a security – rather, it is a derivative in the form of a token which is tethered or ‘pegged’ to an underlying asset. Rather than being pegged to FIAT, like a stablecoin, these tokens are pegged to a publicly listed stock.
To achieve this support, Bittrex Global will be working hand-in-hand with DigitalAssetsAG. In a simplified process, this would work as follows,
- DigitalAssetsAG buys shares of stock in a company, designating them for tokenization
- Purchased stocks are custodied by a licensed bank
- Bittrex generates digital tokens on a 1:1 for each share, representing a collateralized derivative contract
- Investors purchase tokens, gaining exposure to company stock indirectly
Bittrex Global has noted that moving forward, it will continue working to expand on both the functionality of its tokenized stock services, as well as supported assets. For the time being, the following companies are those which investors can gain exposure to through use of this new service.
- Beyond Meat Inc.
- SPDR S&P 500 ETF
If the idea of these tokenized stocks is intriguing to you, make sure to sign up at Bittrex Global.
Now that we know what tokenized stocks are, and which are on offer, why are they important? These assets offer various perks/benefits to investors, with the following being a few key examples.
Investors around the world often have their opportunities restricted to assets traded within their own nation. An investor residing outside of the United States will typically find it difficult to gain exposure to U.S. based companies such as Apple, Tesla, and Amazon. By utilizing tokenized stocks, this issue is eliminated, as the investor is simply buying a derivative – while the actual stock is purchased by an eligible entity.
This perk is particularly useful for investors looking to gain access to international STOs in a legal manner. These events themselves have seen restricted growth, due to a limited investor pool. By giving investors the opportunity to purchase tokenized stock, this investor pool instantly grows to encompass a nearly global audience – potentially jumpstarting the digital securities sector.
By gaining exposure to a company through a tokenized stock, investors can avoid sometimes hefty fees, as the use of a broker is not required.
Stocks such as Apple, Tesla, and Amazon are listed on traditional stock exchanges. This means that in order to trade these assets, investors must do so within normal trading hours. By purchasing a tokenized stock, investors can buy/sell at any time, regardless of whether traditional markets are open.
Not Digital Securities
With terminology like digital securities, security tokens, tokenized securities, and now tokenized stock, it is easy to get overwhelmed and confused. While we won’t go in to the intricacies of what differentiates each of these asset types, it is important to note that tokenized stocks are not a security. Rather, they represent a derivative contract which is collateralized by a security. As they are created and pegged to these securities on a 1:1 basis, a tokenized security will directly mimic market activity of its underlying security.
Offering tokenized stocks marks a big change for Bittrex. The decision to offer these derivatives is a positive sign of platform expansion, after a period of consolidation throughout 2019 and 2020.
During this time period, Bittrex dealt with various legal issues, which resulted in the company restricting services to traders residing in 31 countries around the world. It also led to the rise of Bittrex Global, a variant of the platform geared specifically for those outside of the United States, and the exchange through which these tokenized stocks are on offer.
While the idea of tokenized stocks may sound fresh and intriguing, Bittrex Global is by no means the first company to attempt supporting them.
Over two years ago, DX.Exchange launched out of Estonia, with high hopes of establishing a respected exchange hosting a variety of digital assets. At the time, the company caught the attention of many, as it was one of the first exchanges to announce support for tokenized stocks like Apple, Tesla, Amazon, and more. While the idea was intriguing, the exchange was plagued with problems, and eventually went bankrupt barely over a year into its lifecycle.