Tokenized Stocks Explained

One of the hottest crypto instruments for stock traders and crypto investors alike is tokenized stocks.

Since some don’t know what it means, are uncertain about the benefits or where you can trade them – Crypto Lists decided to make a review where all about tokenized stocks is explained.

What is Tokenized Stocks?

Tokenized shares are cryptocurrencies that mimic actual traditional company stocks or shares. While they will not necessarily give you a share of the company’s equity, their prices will generally move in a similar pattern to that of the company’s shares. Since tokenized stocks are cryptocurrencies, they can be traded on crypto exchanges. At the moment, there aren’t many regulations covering tokenized shares, so you don’t need to go through a broker to purchase the tokens. That said, there is usually a custodian and investment institution involved in the creation of the cryptocurrency. For example, Binance is involved in the development of tokens that are traded on their platform. Binance stands out from other crypto exchanges in that it guarantees owners of the stocks a share of the companies, meaning that holders qualify for dividends. With lots of other tokenized shares, you will simply be able to make profits through spot trading.

Is tokenized stocks similar to normal trading with stocks?

Trading normal stocks is quite different from trading tokens. First, you should note that there are fewer restrictions on people who want to buy tokenized shares. You can make the purchase from almost any part of the world and will not need to hire a broker to complete the transactions. Another difference is that tokens allow investors to purchase very small fractions of the companies. This makes the barrier to entry a lot smaller. You also need to note that tokenized shares are traded 24/7, so you don’t need to wait for the market to open.

How does tokenized stocks trading differ between FTX, Coinbase and Binance?

These three have emerged as the top platforms for trading tokenized shares. One key difference among these platforms is the fees. FTX charges much lower trading fees compared to Coinbase and Binance.

At the moment, Binance has a wide range of tokenized shares, and this naturally makes it stand out from Coinbase. In fact, Coinbase hasn’t established itself as a place for trading these cryptocurrencies.

When you buy these tokens on Binance, you will own a share of the company you bought into and will receive dividends. FTX has also stated that their tokens are backed by actual shares, but it is not clear whether you can redeem the tokens for traditional stocks. Coinbase hasn’t made any statements regarding the ownership of traditional shares, so it’s unlikely that you would get dividends when you buy tokenized shares at Coinbase.

Why do many prefer tokenized stocks over traditional stocks?

One reason why crypto enthusiasts choose to trade tokens is that they can still stick to the crypto world while engaging in traditional stock trading. Another benefit of tokenized stocks is that they make it easy to get into stock trading. You will not need to invest large sums of money into the stocks as you can purchase small fractions of the shares. Also, with tokenized stocks, you can easily purchase the shares of companies in different countries. While this is still possible with traditional stocks, it is a lot more complicated to do without the tokens.

How is tokenized stocks regulated?

Tokenized stocks are considered securities in the USA, so owners of the cryptocurrencies will need to pay taxes just like regular shareholders. However, outside the USA, tokenized stocks are generally considered normal cryptocurrencies and are not subject to any regulations. The crypto exchanges still need to get licenses and authorization from various financial bodies as this helps to build trust among customers. In order to trade tokenized stocks on Binance, Coinbase, FTX, and other reputable platforms, you will be required to complete KYC procedures. The platforms are not required to back the tokens with anything, but most of them hold on to actual company stocks on behalf of the owners of the tokens.

Which are the 10 most popular tokenized stocks?

Here are the ten most popular tokenized stocks by market cap:

Mirrored Apple (MAPPL)
Mirrored Tesla (mTSLA)
Facebook Tokenized Shares
Mirrored Alibaba
Mirrored Netflix
Mirrored Twitter
Moderna Tokenized Shares
Square Tokenized Shares
PayPal Tokenized Shares
Mirrored Google (mGOOGL)

Where can you trade tokenized stocks?

FTX is the exchange with the lowest fees and among the biggest selections of tokenized stocks. You can trade Amazong (AMZN(USD), AMD (AMD/USD), Air BNB (ABNB/USD), Alibaba (BABA/USD), NIO (NIO/USD), Netflix (NFLX/USD), Tesla (TSLA/BTC, TSLA/USD or TSLA/DOGE) and Uber (UBER/USD) to name a few. Try FTX today and enjoy trading tokenized stocks. Alternatively, you can trade with Binance or Coinbase too, but their fees are slightly higher.

Are there also tokenized funds?

Tokenized funds are often confused for tokenized stocks, but these are different products. Tokenized funds simply work like traditional investment funds, and they help with liquidity. With tokenized funds, the barrier to entry is quite low. Also, you will not need to go through the cumbersome manual processes that are associated with investment funds. Tokenized funds can be traded 24/7 as there are no opening and closing times for the market.

One of the best-known tokenized funds is ARKK from ARK Invest. This is an actively managed exchange-traded fund that invests in domestic and international securities. It mostly invests in companies that are deemed to be disruptive, and that means the earning potential for investors is very high. Given the increased popularity of ARKK tokenized fund, it can now be traded on FTX, Coinbase, and Binance.