Bittrex, one of the older and more established exchanges in the cryptocurrency space, today announced the introduction of tokenized stocks trading on its platforms.
Users will now be able to trade stocks 24/7 using the exchange as it adds top-tier brands to its lineup including Apple, Tesla, and Amazon.
This potentially marks a new era for the crypto exchange as it branches into asset tokenization. Bittrex becomes the second exchange in the crypto space to push the frontier after FTX debuted its offering at the end of October.
Bittrex Joins the Tokenization Bandwagon
The topic of asset tokenization and its eventual implementation has been discussed in the crypto space for years, with details about regulations unclear.
Fast-forward to 2020 and cryptocurrency exchanges have now been able to set up the framework to legally enable this new hybrid form of trading.
Bittrex has completed proper KYC and AML regulations through a German custodian and has also specified the way it will allow for the tokenized assets to be traded.
According to Bittrex, tokenized stocks cannot currently be withdrawn from the platform. It remains unclear whether this will change in the future:
“No. Tokenized Stocks can only be bought, sold and traded on the Bittrex Global exchange. You will not be able to withdraw your Tokenized Stocks to other exchanges or wallets.”
What is Asset Tokenization?
Asset tokenization is the process of having the value of a physical asset such as gold, real estate, or stock, represented as a digital token.
There are many benefits to having an asset represented as a token, such as the ability to break down the stock into fractional shares much smaller than what is currently allowed in the stock market. Tokens can also trade 24/7 without pause.
For some stock traders, these additions may add a new level of stress compared with traditional markets. However, they may also offer increased opportunities for those who previously had limited access to the world’s largest markets.
Bittrex explains how tokenized stocks work and how they are traded:
“Tokenized stocks are a tokenization of a digital total return swap contract (“TRS”) (similar to contracts for differences). The Tokenized stocks value is based on and collateralized with a digital asset representation of the underlying asset, a traditional security (typically a publicly traded equity) and the value of the digital asset is determined by the value of the traditional security.”