Binance, the world’s largest cryptocurrency exchange by trading volume has launched a unique product named tradable stock tokens that intends to pave way for a broader section of people to generate capital returns on equities, including regular dividends, without a need to purchase a full share as in the conventional market.
Binance has chosen Tesla’s stock, which is currently trading near $700 level, to be listed as the first stock token on its platform. Instead of buying a total, conventional share, which needs a custodial arrangement, users will be able to buy one-hundredth of a Tesla share in form of a digital token. Binance said:
“Each digital token represents one share of equity stock and is fully backed by a depository portfolio of underlying securities that represents the outstanding tokens. Users will be able to trade fractional tokens.”
Hence, one-hundredth of a stock token reflects comparable fraction of a Tesla share and the stock price will get settled in Binance USD (BUSD), a stablecoin backed by the greenback and rolled out by Paxos Trust Company. Notably, stock tokens cannot be converted into shares.
Binance CEO Changpeng Zhao trusts that digital stock tokens will offer a link between conventional and cryptocurrency markets and wider access to equity markets, paving way for a “more inclusive financial future.”
Interestingly, digital stock tokens can be traded on a commission-free basis and the product has been created along with licensed German investment company CM-Equity AG and the Swiss-headquartered asset tokenization firm Digital Assets AG.
Currently, residents of the US, China and Turkey are not allowed to have an account. Additionally, a wannabe client should complete the KYC (Know Your Customer) procedure to qualify as a digital stock token trader on the crypto platform.
The first-quarter of Binance has been a robust one, as per today’s press release, showing 260% increase in traded volume and a 346% rise in users. In the meantime, the exchange’s native token Binance Coin (BNB) has appreciated by over 900% so far in 2020.
