Cryptocurrency Exchange Binance is now allowing its users to buy fractions of companies that are tradable on the stock market. This is achieved through a new tokenized stock trading service, starting with Tesla (NASDAQ: TSLA).
Following this announcement, Tesla’s stock went up 8.6% during the normal hours of trading yesterday.
The crypto exchange announced on Monday the launch of Binance Stock Tokens. Most importantly, this launch is based on zero commission digital tokens that qualify token holders for returns including dividends.
To make this clear, as of April 12 at 1:35 p.m. UTC, Binance users are available to buy fractions of actual Tesla shares that are currently traded at $762.32 per share at the time of writing. This looks like a great opportunity for people who want to purchase Tesla shares but can’t due to its high price. Investors are now able to purchase as little as one-hundredth of a Tesla share, with prices settled in Binance USD (BUSD).
Each token is backed by a corresponding share in a depositary portfolio of underlying securities. Binance is launching these tokens in partnership with the investment firm CM-Equity AG and asset tokenization platform Digital Asset AG.
However, this is not the first tokenized stock in the crypto world. Terra Labs’ Mirror Protocol was actually the first one to go live in December 2020 but instead, Mirror uses synthetic stocks (tokenized representations of actual equities).
The creators of stable coin Terra announced the launch of the Mirror Protocol in December, a way to mint crypto assets that mimic the value of shares in public traded companies such as Tesla or Apple.
“We were motivated to create a way for retail investors around the globe to more easily participate in the U.S. equities market,” Do Kwon, CEO of Terraform Labs, the company behind Terra, said in a press release.
Binance allows uses to buy a minimum of 1/100 of a stock token which represents the same fraction of a Tesla share. The exchange also mentioned that the tokens will be priced and settled in Binance USD (BUSD). BUSD is Binance’s stable coin that is pledged to the U.S. dollar.
In February, Tesla bought $1.5 billion in Bitcoin (BTC) and ever since then the stock has been trading similarly to Bitcoin’s moves. Elon Musk has also announced that the company is now accepting BTC payments for its vehicles.
Binance is the world’s largest cryptocurrency exchange that provides a platform for trading the various cryptocurrency pairs. As of January 2018, Binance was the world’s largest cryptocurrency exchange in terms of the trading volume. Binance was founded in 2017, by Changpeng Zhao, a developer who has previously created high-frequency trading software. It has its headquarters in Malta and only one month ago it was being investigated by the Commodity Futures Trading Commission over concerns that it allowed Americans to place wagers that violated U.S. rules.
However, the exchange has not been accused of misconduct and the investigation may not lead to enforcement action.
“We’ll continue to improve our compliance,” Zhao said. “We’ll also work very actively with regulators around the world to improve the compliance standards of the industry.”
According to Bloomberg, “The scrutiny is the latest sign that market watchdogs may thwart the crypto industry’s ambitions of becoming more mainstream for U.S. investors. The CFTC considers virtual currencies like Bitcoin and Ether to be commodities and claims jurisdiction over their futures and other derivatives. That means crypto platforms face strict customer protection and oversight demands if Americans are trading on them — regardless of where exchanges are based”.
The exchange’s native crypto is Binance Coin (BNB) and has surged more than 200% over the last two months. It has reached its all-time high of $637.44 and is currently traded at $556.63. Even though it is not clear what is driving the price of the coin, one of the reasons can be due to its use of exchanging BNB to purchase other cryptos such as altcoins.
The launch of the tokenized stock Tesla is only the beginning. As I mentioned in my previous articles, we are moving fast into a digital economy where cryptocurrencies are now becoming the new stocks. This is only the beginning of many tokenized stocks to follow.
Disclaimer – I/we have no position in any stock mentioned. I wrote this article myself, and it expresses my personal opinions. I am not receiving any compensation for it, other than FDGT Academy. I do not have or had in the past any business relationship with any company that is mentioned in the above article.
I am a stock analyst/investor with prior experience and knowledge to BSc Accounting and Finance. After completing my degree and exposure to the accounting firms I decided that the direction I should choose is towards the Investment world. I completed my masters in Investment Management where it gave me solid fundamentals to build my career on. I have examined a lot of different aspects of investment, from REITS, derivatives, currencies, bonds, equity and hedge funds. I never stopped learning about the market which is why I can analyze and write articles for FDGT community always personally opinionated. My passion are green energy and electric vehicles stocks as a whole. I also had my share of analyzing the work form home stocks that are coming to take over in the upcoming years.
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