- K Lontos and M Bacina
Binance's Tokenized Stock Trading
After launching Binance Stock Tokens, Binance.com is now allowing users to trade tokens which represent fractions of companies' shares.
Binance Stock Tokens are described by Binance as "zero-commission digital tokens fully backed by a depository portfolio of underlying securities that represents the outstanding tokens".
Essentially these tokens are tracking the performance of traditional securities and may well themselves be a form of security as a result.
The tokens state they will:
qualify holders for returns on the underlying securities, including dividends; and
are "denominated, settled, and collateralized in BUSD".
Tesla is the first to participate in Binance's new tokenized stock trading service. From the 12th of April 1:35 p.m. UTC (9:35 a.m. ET), users are able to buy fractions of Tesla shares.
Binance has reported that it:
will continue to respond to market demand by listing more stock tokens and features. Trading of stock tokens will follow traditional exchange hours and is not available for residents in Mainland China, Turkey, and other restricted jurisdictions.
Binance's offering isn't the first foray into tokenized stocks. Terra Labs introduced its Mirror Protocol late last year however Mirror Protocol uses a form of synthetic stocks whereas Binance Stock Tokens are reported to be "backed by physical shares".
The choice to tokenise Tesla stocks is perhaps unsurprising given Elon Musk's support for digital currencies.
With no mention on the website of any financial services or securities licensing, it remains to be seen how securities regulators such as ASIC will view this creep of tokens into what appears to tread very closely to, if not actually be, security tokens which may require financial services licenses to be offered in Australia.