Stock Tokenization: A New Chapter in Financial Innovation

Recently, many well-known fintech companies and trading platforms have launched stock tokenization services, attracting widespread attention in the market. This innovative product offers investors a completely new way to trade stocks, which is expected to change the landscape of traditional financial markets.

Pioneer of Stock Tokenization

A certain U.S. publicly listed fintech company recently launched a highly anticipated stock token service in the EU market. This innovation allows users to buy and sell derivatives tracking stock prices priced in USD, with the platform automatically handling euro conversions and charging a 0.1% exchange fee.

Core Mechanism and Features

1. Custody and Mapping: Stock tokens are derivative products that track the price, with the underlying assets being custodied by institutions licensed in the United States. The platform is responsible for issuing these contracts and recording them on the blockchain. Due to the nature of derivatives, users cannot directly redeem the corresponding securities.

2. Regulatory Compliance: This service is offered as a derivative contract under the EU MiFID II framework, in compliance with relevant licensing requirements, providing users with compliance protection. Currently, it is only available in the EU region.

3. Trading Time and Corporate Actions: Initially, trading is available five days a week, from Monday 02:00 to Saturday 02:00 Central European Time/Daylight Saving Time. The platform will handle corporate actions such as dividends and splits on behalf of users.

4. Blockchain Technology: The issuance of stock tokens utilizes blockchain technology, initially based on a certain Layer 2 network, with plans to migrate to a self-built Layer 2 blockchain in the future.

5. Private Equity Market: The platform has also achieved access to private equity for the first time through blockchain technology, launching tokenized stocks of a well-known AI company and aerospace company to European users.

Innovative Models of Cryptocurrency Trading Platforms

Another well-known cryptocurrency exchange platform has also launched its own stock Token product, adopting a more open design philosophy.

Features and Advantages

1. Custody and Mapping: A third-party institution is responsible for purchasing and custody of real stocks or ETF assets. Each Token is pegged 1:1 to the underlying asset, and the custody process is strictly regulated. The tokenization process is implemented through smart contracts, with prices synchronized in real-time with the traditional market.

2. Regulatory Compliance: Actively collaborate with global regulatory agencies to implement strict KYC and AML processes. Currently, it is only open to certain non-U.S. clients, with plans to gradually expand the supported jurisdictions in the future.

3. Trading Time and Company Actions: Supports 24/5 trading, breaking through the traditional time constraints of the US stock market. Dividends are indirectly distributed through a token price adjustment mechanism, while other company actions are handled by the issuer.

4. Blockchain Support: Based on a high-performance public chain, using the native Token standard of that chain. Future plans to expand to other high-performance blockchains to enhance interoperability.

5. Issuance Status: The first batch includes 60 U.S. stocks and ETFs, featuring several tech giants and well-known ETFs. It is also tradable on multiple decentralized trading platforms, expanding market coverage.

Comparison of Two Modes

The model of fintech companies listed on the US stock market has advantages in terms of compliance and mainstream audience coverage, and offers non-listed stocks; in contrast, cryptocurrency trading platforms cover more regions, support native on-chain transactions and DeFi protocols, and are more aligned with the cryptocurrency ecosystem.

Future Opportunities

For entrepreneurial teams, there are still opportunities in the field of stock tokenization:

1. Segmented audience or regional coverage: targeting markets that are difficult for traditional brokers to reach but can be covered by cryptocurrencies.

2. Financial Product Innovation: Develop new derivatives and trading strategies based on stock tokens, such as high-leverage contracts, leveraged ETFs, etc., to create differentiated advantages.

Stock tokenization, as a new direction of financial innovation, is gradually changing the way investors participate in global financial markets. With the development of technology and the improvement of regulations, this field is expected to welcome more breakthrough progress.