Binance Launches Tradable Stock Tokens in Tesla

Cryptocurrency exchange Binance is launching tradable equity tokens, which aim to enable the wider public to gain capital returns from stocks, including potential dividends, without having to buy full traditional shares.

The first publicly traded stock to be issued in the form of Binance Equity tokens will be Tesla, whose share price is currently hovering around $700. Instead of buying full traditional shares that require a physical stock certificate held in custody, users can purchase as little as one percent of a Tesla stock represented by a digital token. Binance noted: "Each digital token represents one share of equity and is fully backed by a portfolio of depositary securities representing the underlying securities outstanding. Users will be able to trade fractional tokens."

Thus, one percent of a stock token is equivalent to a fraction of a Tesla stock, and the stock price will be settled in Binance USD (BUSD), a stablecoin pegged to the U.S. dollar and issued by Paxos Trust Company. Stock tokens are not redeemable for shares.

Binance CEO Changpeng Zhao believes that digital stock tokens will build a bridge between traditional and crypto markets and broaden access to stock markets, leading to a “more inclusive financial future.”

Trading in digital equity tokens will be commission-free, and the product has been developed in conjunction with licensed German investment firm CM-Equity AG and Swiss-based asset tokenization platform Digital Assets AG. Digital Assets AG, which operates a digital equity tokenization platform, cannot open their trading in restricted jurisdictions such as China, Turkey, and the United States, and must complete a Know Your Customer process to qualify as a digital equity token trader on the exchange.

According to an announcement on Monday, Binance had a strong first quarter of 2021, with trading volume up 260% and user numbers up 346%. Meanwhile, the exchange’s native token, Binance Coin (BNB), has risen more than 900% so far this year.