Prominent cryptocurrency exchange, Binance has tapped into the tokenized stock trading space. With this service, the exchange aims to gain interest from the part of the public interested in pocketing capital returns on equities without having to purchase a full share. Binance announced this new venture, unveiling its first publicly tradable equity to be a stock token for Tesla.
This would allow people to hold as little as one-hundredth part of Tesla’s share instead of buying a whole. According to Binance:
“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 Tesla stock token will represent one share of the company and one-hundredth of a stock token will represent the same fraction of a Tesla share. The stock prices will be settled in Binance’s native stablecoin, Binance USD [BUSD]. However, these stock tokens cannot be redeemed for shares.
Binance has been long considering the launch of stock trading service and was looked at as a bridge between the traditional and crypto markets by the CEO of the exchange, Changpeng Zhao. Zhao, popularly known as CZ stated:
“Stock tokens demonstrate how we can democratize value transfer more seamlessly, reduce friction and costs to accessibility, without compromising on compliance or security.”
Binance will maintain commission-free trading of the digital stocks. However, it was not the only one in the field to offer this service. Binance has joined the league of other popular exchanges like FTX and Bittrex Global, which have offered tradable stock tokens since 2020.
Like FTX and Bittrex, Binance has also partnered with the German financial firm CM Equity AG and Switzerland-based tokenization firm Digital Assets AG for the service. However, the service was available worldwide but remained restricted in China, Turkey, and the United States.