Strangely little attention this news has generated, at least among the Leofinance community, however today the following statement from Binance on Twitter has circled the Earth (or Mars?) several times:
Today, we're launching tradable stock tokens with zero commissions. Now, you can access both cryptocurrencies and traditional stock markets, all from the convenience of your Binance account.
To dig deeper, each stock token on Binance will represent a 100% equity share backed by similar shares stored in an underlying stock pool. The tokenized shares of Tesla, Elon Musk's famous electric car company, will have the honor of being the company that kicks off this exchange. This Binance initiative is made possible thanks to the support of investment firm CM-Equity AG and also asset tokenization platform Digital Assets AG.
Fractional share trading seeks to make participation in traditional markets more affordable for users. A Tesla share is around USD $700, a relatively high price for an average trader.
Users will be able to purchase a minimum of one-hundredth of a token of Tesla or any other company at the time Binance announces which one will follow Musk's company. On the other hand, the stock tokens are priced and settled on Binance USD (BUSD), a stablecoin backed in US dollars. In other words, customers of the exchange will be able to buy or redeem these tokens from the aforementioned stablecoin. It should be noted that these tokens are not shares in themselves but will entitle holders to gain exposure to the underlying assets and possible corporate actions, including dividends and stock splits.
Binance also assured that it will not charge commissions for the purchase of tokenized shares, however Binance does not clarify what is the business model of the exchange around the service, but emphasize that the sense of this move is to expand the market to users who make life on this platform.
Changpeng Zhao,CEO of Binance specified the following:
- Share tokens demonstrate how we can democratize the transfer of value more seamlessly, reduce friction and accessibility costs, without compromising compliance or security. Through connecting traditional and cryptocurrency markets, we are building another technological bridge to a more inclusive financial future.
It is worth noting that other services similar to Binances FTX, Bittrex Global and Uphold have this type of trading of tokenized shares of the stock market available to their customers, who for the last year have been able to acquire tokens from Tesla, Google, Amazon and others.
Binance also warns that its service to buy or sell tokenized shares will assume the same Nasdaq market hours. The explanation offered to the community is that this market coincides with the real-time execution of negotiations on Wall Street.
It should be noted that tokenized stock trading is not available to residents of the U.S., Turkey, China and other restricted jurisdictions, and KYC measures apply for traders (what did they expect from a centralized institution like Binance?). Tesla's tokens open the gates for this type of trading activity on Binance; but the company intends that in the future, other equity-backed tokens will join Musk's electric jewel.
