Stock tokens are relatively a new idea powered by Paxo Trust Company, NY, and Binance's global front binance.com. This venture between Tesla (not on paper), Binance, and Paxo connects two markets "otherwise believed to be anti-pattern for each other", together.
According to the chairman of Binance Mr. Changpeng Zhao, this is one way of creating a seamless bridge between two markets while democratizing the process of value transfer more transparently.
TSLA tokens a.k.a. fractions of TSLA stock started trading on Binance.com on Monday morning April 12th, 2021, and are not available to trade in the USA, China, and Turkey. The tokens will trade with the pair of Binance Smart Chain's stable coin BUSD which is almost always equivalent to $1 USD.
The financial side of the story is being handled by German investment firm CM-Equity AG and Swiss-based Digital Assets AG and TSLA stock tokens will be fully backed by TSLA stock and will behave in many of the same ways as itself i.e. the splits, the dividends, and everything else that comes with the security market including the trading hours of Nasdaq.
Although fractional shares are not a new thing (Fidelity, Robinhood, Charles Schwab, Stash, etc... already offer them), just being able to buy them against cryptocurrency on a particular blockchain makes it one of a kind. This of course means that the listing of such Tokenized stocks will be limited to highly speculated, volatile, and anticipated stocks, and I bet, GME will not fall behind in this race.
There are certain caveats to the approach of tackling fractions of shares through crypto fiat and tokenization.
The stock tokens can be sold in fractions of 1/100th of the original share. That means investors with only $7 to invest could add Tesla (TSLA) to their portfolio with a token worth 1/100th a single share if the share price is $700.
The case of 1broker, and Abra in the past for selling Gold and Securities for Bitcoin are also a litmus test of such a step and it is yet unknown what the future of Tokenized stocks will look like. This may be the very reason this is not being traded in the USA.
As a cryptocurrency enthusiast, it also makes me wonder, "What will be the utility of this token?". It certainly does not make you a partner of Tesla as opposed to buying security directly from the stock exchange or broker. What utility this might have other than luring in more money? Tesla and Crypto being the talk of the decade, seems like a perfect setup of luring in more money into Binance Smart Chain.
As an investor, I do not personally like the idea of Stock tokenization and the concept of bridging the gap between the two markets. There was never a gap, in fact, the so-called gap was actually a thin line that people were crossing over to run away from the other side of the USD-backed economy.
Tesla stock had a great run on this news, 14% or $80 from the previous approximately. It shows bullish signs and may even cross $850 over the next week but this creates more volatility in Tesla than there already is. This also brings the effects of all the positive and negative news of Cryptocurrency, China, and Binance into Tesla.
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