Tokenized Stocks of the Stock market in Crypto

Updated on 25 November, 2022 10:31 AM
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    Tokenized stocks are a little bit different from normal stocks and other digital assets. In this article, we will guide investors in detail about tokenized stocks and how they can get them for generating profits through trades.


    What are Tokenized Stocks?

    A tokenized stock is a derivative digital asset that tracks the performance of an underlying stock. It trades on various licensed exchanges using blockchain technology. You can buy one share of tokenized stock but it doesn’t give you any ownership in the underlying equity. You get a derivative collateralized by a share of the underlying stock. Tokenized stocks are different from security tokens, or digitized assets in equity, fixed income, real estate, investment fund shares, and commodities.


    How to buy tokenized stocks?

    Tokenized stocks trade on several platforms like FTX and Bittrex. You must pass the regulatory requirements including KYC and AML compliance to become eligible to purchase tokenized shares of a company on these exchanges. At this time, only international investors approved to trade on the respective exchanges can purchase tokenized stocks. Investors get the same dividend payout even though the token is a mirrored asset of the underlying equity if the true equity shares pay dividends. You can redeem the tokenized stock for the actual underlying stock. CM-Equity and Digital Assets AG like brokerage companies tokenize these stocks. 


    Most common Tokenized Stocks

    Not every traditional tradeable stock is available for purchase via a tokenized manner. Most large-cap companies like Apple ($AAPL), Google ($GOOG), Facebook ($FB), and Tesla ($TSLA) are available for you to invest in via their tokenized stock. There are many tokenized stocks available such as mirrored Apple (mAAPL), mirrored iShares Gold Trust (mIAU), mirrored Tesla (mTSLA), mirrored iShares Silver Trust (mSLV), mirrored Netflix (mNFLX), mirrored United States Oil Fund (mUSD), mirrored Alibaba (mBABA), mirrored Google (mGOOGL), and mirrored Twitter (mTWTR).

    Key Features of Tokenized Stocks

    • These tokens have greater liquidity because a broader segment of the population can access tokenized stocks compared to traditional shares.
    • It provides faster transaction and clearance time. 
    • You can obtain fractional shares from specialized firms such as SoFi. 
    • International investors can efficiently invest in tokenized stocks.
    • Tokenized stock transactions are settled instantly using blockchain technology.

    Disadvantages of having Tokenized Stocks

    • Token holders are not technically shareholders. They don’t own any equity and voting rights in the underlying company.
    • Tokenized stocks come with additional risks including the custodial firm that holds shares and the crypto exchange that holds the tokens.
    • You require additional know-your-customer (KYC) requirements details.
    • There is still a lack of certain flags from regulatory agencies worldwide.

    Are Tokenized Stocks Regulated?

    The regulatory status of trading tokenized stocks is currently unclear. After the increase in the crypto market volumes, the Securities and Exchange Commission (SEC) classified many coins and offerings that went public via an ICO as securities. Tokenized stock platforms argued that they were trading derivatives, not stocks. They shouldn’t be subject to the same scrutiny as actual security trading platforms. Such determination is as of yet, unresolved.

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