Stock Tokenization: A New Wave of Financial Innovation

Recently, several well-known financial companies have launched stock tokenization services, attracting widespread attention in the market. This innovative product offers investors a new way to trade stocks, which is worth exploring in depth.

Pioneer of Stock Tokenization

A certain US-listed fintech company recently launched a highly anticipated stock token service in the EU market. This innovation allows users to buy and sell derivatives that track stock prices priced in US dollars, with the company automatically handling euro conversions and charging a 0.1% exchange fee.

Core Mechanism

1. Custody and Mapping: Stock tokens are derivatives that track prices, with the underlying assets being held in the company's European accounts by a licensed institution in the United States. The company 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 provided as a derivative contract under the MiFID II framework, complying with the EU's licensing requirements for derivative trading services. Currently, it is only available in the EU region and is not tradable in the United States.

3. Trading Hours 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. For corporate actions such as dividends, bonuses, and splits, the company will execute on behalf of the users, including position adjustments, cash distributions, and dividend processing.

4. Blockchain Applications: Stock token issuance utilizes blockchain technology, initially based on Arbitrum, with plans to migrate to a self-built Layer 2 blockchain in the later stages.

5. Private Equity Market: The company has achieved access to private equity for the first time through blockchain technology, launching tokenized stocks of a well-known AI company and an aerospace company to European users, allowing ordinary investors to access equity in unlisted companies.

More Open Design

Another well-known cryptocurrency exchange platform has also launched stock token services, designed to better align with the native characteristics of cryptocurrencies.

1. Custody and Mapping: Partners are responsible for purchasing and custody of real stocks or ETF assets, held in compliant third-party custody institutions. Each Token is 1:1 anchored to the underlying asset, and the custody process is subject to strict regulation. The Token is based on the Solana blockchain and represents partial ownership of the underlying stocks or ETFs.

2. Regulatory Compliance: The company collaborates with global regulatory agencies to ensure that services comply with local laws. Currently, it is only open to non-US customers and does not support users from markets such as the United States, Canada, the United Kingdom, the European Union, and Australia.

3. Trading Hours and Company Actions: Supports 24/5 trading, breaking through the traditional time limitations of the U.S. stock market. Token holders do not enjoy traditional shareholder rights, but economic benefits are transmitted through the token price adjustment mechanism.

4. Blockchain Support: Currently based on the Solana blockchain, with plans to expand to other high-performance blockchains in the future. The first batch includes 60 US stocks and ETFs, which can be traded on multiple cryptocurrency exchanges and DeFi platforms.

Comparison of Two Modes

The former excels in compliance and mainstream audience coverage, and offers unlisted stocks; the latter covers more regions, supports native on-chain transactions and DeFi protocols, and is more in line with the characteristics of the cryptocurrency ecosystem.

Entrepreneurial Opportunities

For startup teams, participating in the issuance of new stock token assets may face fierce competition. However, there are still two types of opportunities:

1. Provide services tailored to specific demographics or regions, covering markets that traditional brokers cannot reach but cryptocurrencies can.

2. Financial product innovation, after stock tokens are included in the asset pool, the entrepreneurial team can offer new derivative assets and trading strategies, such as high-leverage contracts, leveraged ETFs, etc., to form differentiated competitive advantages.