One of the larger exchanges for crypto derivatives, offers twelve tokenized shares on its platform. Stocks of companies such as Apple, Amazon and Tesla can now be traded directly against cryptocurrencies.
Yesterday, the Hong Kong-based crypto-derivatives exchange FTX announced to offer tokenized versions of some of the largest stocks by market capitalization, Bloomberg reports. These are security tokens that represent a fraction of a stock. They can also be redeemed for the underlying securities held by its partner CM Equity.
How the tokens work
A security token is a representation of a real asset on a block chain. These tokens are thus covered by a real equivalent value, in this case shares in companies. By using Blockchain technology, traditional assets can be improved in terms of divisibility, transferability, transparency and more.
According to FTX CEO Sam Bankman-Fried, the tokens work similarly to ETFs or depository receipts. Investors can trade the token themselves on FTX, but the underlying security is held by CM Equity. Investors can also redeem their tokens to receive their shares. Currently, this includes twelve securities, namely shares of Facebook (FB), Netflix (NFLX), Tesla (TSLA), and others, as well as the SPDR S&P 500 Exchange-Traded Fund (SPY).
Great potential of the solution
The project is an important step towards digital trading of a wide range of assets. It may not change much for stock trading, but for illiquid assets such as real estate, art or commodities, tokenization can open up new worlds. Through the divisibility, global transferability, and low transaction costs of Blockchain tokens, smaller private investors can also access these assets. Markets with historically low liquidity could thus enjoy a new inflow of investment.
“These products demonstrate a powerful future in which assets are being digitized and traders have unlimited creative potential to express their beliefs about the markets. These equity products reflect the reality that today’s traders are cross-industry and cross-sector, seeking trading opportunities that are fully aligned with their interests and mindset.” – Sam Bankman-Fried, CEO of FTX.