Cryptocurrency exchange Binance is launching tradable stock tokens that aim to enable a wider section of the public to pocket capital returns on equities, including potential dividends, without having to purchase full, traditional shares.
The first publicly tradable equity in the form of a Binance stock token will be Tesla, the share price of which currently hovers around the $700 mark. Rather than purchase a full, traditional share, for which custody of a physical share certificate is required, users can purchase as little as one-hundredth of a Tesla share represented by a digital token. Binance stated:
“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.”
One-hundredth of a stock token therefore represents the same fraction of a Tesla share, and stock prices will be settled in Binance USD (BUSD), a stablecoin pegged to the U.S. dollar and issued by Paxos Trust Company. Stock tokens are not redeemable for shares.
Binance CEO Changpeng Zhao believes that digital stock tokens will provide a bridge between traditional and crypto markets and broaden access to equity markets, resulting in a “more inclusive financial future.”
Trading of the digital stock tokens will be commission-free, and the product has been developed together with licensed German investment firm CM-Equity AG and the Swiss-based asset tokenization platform Digital Assets AG. Participation in their trading is not open to restricted jurisdictions such as China, Turkey and the United States, and a Know Your Customer process must be completed to become eligible as a digital stock token trader on the exchange.
Binance’s Q1 2021 has been a strong one, according to today’s announcement, with 260% growth in traded volume and a 346% increase in users. Meanwhile, the exchange’s native token Binance Coin (BNB) has rallied by more than 900% so far this year.