Binance Launches Zero-commission Stock Tokens Starting with Tesla
Binance is the latest cryptocurrency exchange that will allow its users to trade stocks now.
After FTX, leading crypto exchange Binance has announced the launch of zero-commission tradable stock tokens fully backed by a depository portfolio of underlying securities that represents the outstanding tokens.
The exchange allows users to trade fractional stocks by listing them as tokens, lowering the bar for entry into high-priced stocks. To offer these tokens, just like FTX, Binance has partnered with German investment firm CM-Equity AG and Swiss-based Digital Assets AG.
These tokens are denominated, settled, and collateralized in the exchange’s stablecoin BUSD. Binance CEO Changpeng Zhao said in a statement,
“Stock tokens demonstrate how we can democratize value transfer more seamlessly, reduce friction and costs to accessibility, without compromising on compliance or security.”
“Through connecting traditional and crypto markets, we are building another technological bridge for a more inclusive financial future.”
The first stock token to be listed on the exchange is Tesla (TSLA), trading for which (TSLA/BUSD) starts on Monday at 1:35 PM (UTC).
Trading of these tokens will be available only for traditional exchange hours and is restricted to the residents of Mainland China, Turkey, and other jurisdictions.
While holders of stock tokens qualify for economic returns on the underlying shares, including potential dividends, they aren’t granted the same rights as shareholders, such as voting power or suing for wrongful acts.
Previously firms like Fidelity and Charles Schwab have allowed investors to buy ETFs and stocks listed on Nasdaq or NYSE; however, like FTX, which allowed trading of tokenized stock against cryptos such as BTC and stablecoins, Binance is doing the same.
In 2012, 1broker started allowing users to trade stocks and gold with BTC only for the SEC and CFTC to sue them in 2018, alleging that the firm sold securities to US-based investors. In 2019, when Abra started allowing users to buy ETFs and fractions of stocks with BTC, the agencies yet again sent a cease and desist letter last year.
Both the companies paid fines to settle the lawsuit, but while 1broker shut down, Abra still operates as a trading and wallet service provider.
Binance’s latest feature came as its native token BNB enjoys a rally of 1,456% YTD, going to a new ATH of as high as $640. As of writing, BNB/USD is trading around $575. BNB is rallying on the back of the growing popularity and usage of Binance Smart Chain (BSC).