April 12, 2021, was the day Binance launched tokenized stock trading. This means that traders can now use not only cryptocurrencies as assets, but also an additional type of asset - so-called tokenized shares, i.e. digital share tokens that are traded on regular stock exchanges. The value of such digital tokens, as well as their other properties, are equal to real stock shares and are also secured by them.
Each verified user has the right to buy on the Binance exchange as a whole share or a part of it by paying for the purchase with Binance USD (BUSD) stablecoin.
The range of tokenized shares on the Binance exchange
The first tokenized stock that was added by the cryptocurrency exchange Binance was Tesla Inc. Tesla Inc (TSLA) activities include the design, development, production and sale of electric cars, the production and maintenance of solar panels, as well as advanced batteries with high performance and increased durability, and the development of components for renewable energy sources. It is manufacturing that has a significant impact on the overall value of the company.
The minimum purchase limit is set at 1/100th of a share. Binance's trading platform list also includes tokenized securities of the following world-renowned companies like Apple, Microsoft, Coinbase and Microstrategy.
According to sources close to Binance, the exchange plans to expand the range of tokenized securities in the near future, but the process will be implemented gradually, without haste because it requires revision.
At the initial stage, the exchange already has a number of problems.
For example, the company is "attacked" by regulators with accusations of violating securities laws. The company in Hong Kong suffers most of all. So far, no solution has been found and the outcome of the confrontation is impossible to predict. Of course, it is expected that regulators will reconsider their requirements, as the interest of users in the new type of assets is growing, and the exchange intends to promote the development of this area in every possible way.
Peculiarities of tokenized shares trading on Binance: detailed instructions
In order to trade tokenized (digitized) shares on the Binance platforms, you need to go through several mandatory steps:
- open a verified account. On this platform, we are talking about the second level of identification (reconciliation of person and identity.);
- it is important to take into account a number of restrictions: some jurisdictions require complex verification or prohibit you from working with shares at all;
- complete a deposit account;
- convert money into Binance USD currency.
It is important to know! Binding the value of digitized assets to real assets, so they can be traded only during the working hours of the stock market. At other times, applications will be denied.
For the trader, the platform offers a familiar interface, which differs only in the absence of such data as:
- a trading volume;
- an order book.
It is important to know! Digitized shares do not provide for a separate wallet. This means that they cannot be withdrawn from the trading platform. The execution of each trade (there are no exceptions), where the tokenized shares act as assets, takes place on the Binance exchange platform.
During the purchase, the program deducts from the account a certain amount denoted in BUSD. At the same time, the acquired digitized securities or their shares (depending on what the trader buys) appear on the trading balance.
When selling, a similar procedure is provided, which will be done in reverse order.
Features of digitized shares on the Binance exchange
Tokenized stocks tend to ask a low price, making them accessible to every investor, even the retail investor (traders even compare them to ETFs). However, there is a significant difference:
- an ETF provides:
- a set of stocks within the fund;
- a higher level of commission.
- Tokenized stocks allow:
- to make targeted purchases, buying what the trader wants, with no restrictions.
Digitized securities are a kind of analog of stablecoin. The difference is in the security: stablecoin is secured by fiat, while this coin is secured by securities.
Tokenized shares are a derivative, a derivative instrument secured by a smart contract.
Digitized shares are traded as follows:
- an agreement is made between an exchange and an investment company that acquires shares through a broker;
- the crypto trader acquires the status of a client of that investment company (indirectly). This means that he is obliged to comply with all its AML, KYC requirements.
By the way, Binance has formalized cooperation with a completely legal, i.e. licensed company CM-Equity AG (Germany), which owns a depositary portfolio of shares. The process of digitization of these shares is entrusted to the service DigitalAssets AG.
Bittrex, FTX among the services of which digitized assets do the same.
In essence, trading tokenized shares on stock exchanges is a standard process. Again, work with such assets is available only on this one platform, without the possibility of transferring them to third-party cryptocurrency exchanges or to a wallet. The exchange of tokenized assets for physical assets is also unavailable.
Instead of a number of restrictions, Binance offers traders to sell these shares to it.
Special features of tokenized shares on the Binance exchange
- the asset is backed by actual securities;
- the asset has a high level of liquidity;
- traders have 24-hour access to trade, in contrast, for example, to the US stock market, where trading in traditional securities is limited to the period 9:30-16:00;
- holders of tokenized shares receive interest income - dividends (fractional securities are no exception);
- ordinary investors have no voting rights and do not participate in the company's management processes;
- have less volatility compared with analogous digital assets, which is connected with their price pegged to the real securities of large companies;
- possibility of flexible management of the financial side of the issue.
In 2021, statistics shows an increase in the customer base of the Binance exchange by 350%. As for the trading turnover, it managed to increase by 260%. The fact of active growth of the market of digital coins only contributes to the development of the exchange and plays an active expansion of the crypto market. To date, the capitalization of digital currencies in the world has exceeded $ 2 trillion.
The new type of assets of Binance are additional opportunities for the client base to develop and increase.
The emergence of tokenized shares was the next step in the rapid development of the cryptosphere and its wide popularity. It is a kind of thread that connects the new market with traditional trading. Increased demand and exchange plans suggest that it is possible that as early as 2021 we will see other digitized assets listed on Binance. This will be interesting for investors to diversify their portfolios and include classic instruments. Traders do not stop comparing returns between digital and traditional stocks, but statistics show that Tesla securities, for example, became 7 times more expensive last year.