The cryptocurrency market is characterized by constant changes. One trend chases the next. New cryptocurrency projects emerge, others fail. At the same time, there are some cryptocurrency brokers and exchanges where investors can buy tokenized shares. It is possible to buy individual fractions, and at the same time, you could even pay for your groceries at the supermarket by credit card indirectly using tokenized shares. But what does this trend, which many crypto fans and investors do not have on their radar yet, represent?
What are tokenized shares?
A share is essentially a certified security that guarantees you ownership of shares of a company. The securitization deed is held by a custodian company. We, the investors, trade the shares through the broker. However, a share is essentially still a security with physical origins. Tokenized shares now create a digital twin for these securities. In doing so, they are an intermediate step towards the security token, which is created directly on the blockchain. The tokenized shares represent the underlying security via a smart contract. Subsequently, the derived token can be traded on the respective stock exchanges. But why bet on tokenized shares in the first place?
Lower costs and stock splits
Tokenized shares also offer the possibility of purchasing fractional share certificates. Not every investor can afford the expensive Amazon shares in one go. Tokenized shares make it possible to trade shares fractionally. However, some brokers already offer the purchase of fractional shares, and savings plans are also possible at any time if the one-off purchase is simply beyond the financial reach.
At the same time, the costs for investors could be lower, as some trading exchanges do not charge order fees. However, this trend has already spread to stockbrokers. After all, you can also buy stocks with little or no commission at Scalable Capital, eToro or Trade Republic.
Fast processing and tradable 24/7
Stock token transactions take place in real time. This is also the case with stocks – at least from the investor's point of view. After all, the actual transfer of ownership only takes place a few days later. The efficiency is different. Tokenized stocks can make all of this possible in real time, which significantly speeds up the old financial world. At the same time, it would not be necessary to limit oneself to the 5-day week. While the stock markets close, cryptocurrency exchanges are open 24/7. Trading stocks via tokens is then possible even on weekends, although price movements are unlikely and some trading exchanges seek to orient themselves in relation to the usual opening hours of the stock markets.
New business models and card payment with shares
The trend of tokenized shares will give rise to new business models. And there are also other possibilities for everyday life. For example, you could now pay for your groceries at the supermarket using shares. To do this, you use a credit card that contains tokenized shares as a means of payment. Crypto broker Bitpanda already uses this service.
Market size remains manageable
Tokenized shares offer certain advantages and are an exciting topic in the field of cryptocurrencies. Nevertheless, it should be kept in mind that the market size is more than manageable. To date, stock tokens are only a trend. We will only see if it will spread in the future.
Are tokenized shares an alternative to CFDs for traders?
In the medium term, tokenized shares could be an attack on CFD providers. Because, let's be realistic, long-term investors will continue to bet on stocks without taking an interest in modern, divergent charting. But more speculative traders could be interested in tokenized stocks, because there are also leverage opportunities here. However, the question of whether the implementation will be successful also remains open. Here, time should be taken to delve deeper into the concept of tokenized stocks, step by step.
The revolution through DeFi and tokenized stocks?
The combination of DeFi and tokenized stocks, in particular, makes cryptocurrency experts fantasize about the future. After all, a decentralized design of stock tokens could have great potential with a synthetic replication of stock prices. Today, however, projects are limited to initial development attempts. Here, it is possible at any time that entire projects will be scrapped or that protocols will disappear again.
Critical View of Supervisory Authorities
While not all crypto enthusiasts have heard of stock tokens, the development has not gone unnoticed by regulators. In late April, BaFin announced that it considered Binance stock tokens to be government securities. This would make higher regulatory requirements relevant. Litigation is likely to clarify how courts will classify tokenized stocks. Regulatory hurdles are likely to increase rather than disappear as tokenized values gain traction.
