Crypto exchange Binance has announced that it is launching zero-commission tradable stock tokens.
Each stock token will be worth the one share of stock. Each token is backed by a corresponding share in a depository portfolio of underlying securities. Binance is launching these tokens in partnership with investment firm CM-Equity AG and asset tokenization platform Digital Assets AG.
Tesla share tokens
In the announcement, Binance said that the first stock token they are listing is for Tesla Inc. In February, the company bought $1.5 billion in bitcoin (BTC). Since then, their stock has been trading similarly to bitcoin. Recently, Tesla CEO Elon Musk announced that the company now accepts BTC as payment for their vehicles.
Binance said that traders will be able to buy a minimum of 1/100 of a stock token, which represents the same fraction of a Tesla share. The world’s largest crypto exchange also said that they will price and settle stock tokens in Binance USD (BUSD). BUSD is the exchange’s stablecoin which is pegged to the U.S. dollar.
Traditional asset exposure for crypto traders
According to the announcement, Binance launched stock tokens to provide exposure for its users to more traditional markets. By utilizing stock tokens, Binance users will also be able to benefit from several unique advantages the exchange provides.
One benefit is the large amount of liquidity that comes with the trading volumes on the world’s largest crypto exchange. The ability to trade fractional units of publicly traded equities also lowers the barrier of entry for entry-level traders. Stock token holders will also receive capital returns on the underlying stock, such as dividends and stock splits.
“Stock tokens demonstrate how we can democratize value transfer more seamlessly, reduce friction and costs to accessibility, without compromising on compliance or security,” said Changpeng Zhao, CEO of Binance.
Finally, the announcement noted that because of their intrinsic links with the underlying shares, stock tokens would have certain limitations. For example, users can only trade stock tokens can only during traditional exchange hours.
Traders will also have to pass KYC requirement to trade stock tokens.