In years to come, there might not be any difference between trading stocks and trading crypto. The two asset classes are converging and this development might go much quicker than we think.
More than 9.5 million Robinhood customers traded crypto in the first quarter of 2021. Robinhood allows everyday investors to buy fractional shares. Fidelity already allows institutional clients to buy and sell crypto. Fidelity, Van Eck and several others want to launch Bitcoin ETFs. But the innovation is that crypto exchange Binance intends launching a token pegged to the price of a Tesla stock. Each Binance-Tesla token represents a Tesla share. The token is backed by a depository of underlying securities and will behave like a Tesla stock. According to Binance, stock-splits and dividend payments will be honoured. The goal of the stock token is to participate in the economic development of the underlying asset. The tokens will be purchased and settled in the Binance USD Stablecoin. And Binance isn’t charging a commission to trade the token. And investors can buy fractional shares of the token, just like they would any other crypto. The stock token is a major breakthrough for investors who still pay high commissions.
Investing in Tesla through Binance’s stock token also offers a convenience factor that shouldn’t be underestimated. The ability to track all investments on one platform. And trading platforms know it. Binance is clearly bullish on stock tokens. It debuted the Coinbase stock token the same day Coinbase went public on the NASDAQ.
Eventually, stock tokens will make their way to the U.S., either through Binance or another company. The market opportunity is too big to ignore. Right now, most American investors are locked out of stocks that trade overseas like Samsung, Aramco, Volkswagen, Nestle etc. Sure, you might be able to get exposure over the counter or via ETFs. But stock tokens are a much better option, almost as good as investing in the stock itself.
In a few years, investors will be able to buy stocks, stock tokens, crypto, ETFs and other investment instruments all on the same platforms. And it’s likely that multiple platforms will be competing for the business, which should lead to more innovation, more investment opportunities and better customer service.
Sven Franssen