It’s no longer news that Blockchain technology is already disrupting global financial system services with the inclusion of capital markets. Conventionally, buying equities usually requires either an investment bank, a stockbroker, some bureaucratic processes or oftentimes a long list of financial assessments. Unlike regular equities, tokenized stocks (traded via the blockchain) do not require any sort of paperwork or the need for a stockbroker as a middle-man, which makes them free from the stockbroker’s fees.
Tokenized stocks are derivatives assets. This simply means that the price of a tokenized stock is determined by the price of the company’s stock.
Equities in digital form, just like digital assets are called Tokenized Stock. The tokenized stock uses blockchain technology and can be traded on cryptocurrency exchanges like FTX.
Just recently, the leader of a fast-growing crypto exchange, Sam Bankman-Fried described tokenization as a growing trend. “Accessing equities markets is spotty country by country,” he says. “You don’t see 24/7 access to most stock markets but FTX’s markets are always open.”
Crypto exchanges also permit tokenized stockholders to get dividends. Trading tokenized stock is similar to cryptocurrency trading but there are some conditions a user must meet.
Though a number of crypto exchanges that offer tokenized stocks seem to be relatively small, recent data reveals the narrative is changing, with a growing number of leading crypto exchanges offering such services. The disruptive product has made it easy for investors in Africa, particularly, who are seeking to increase their exposure to U.S stock markets.
For regulatory reasons, crypto exchanges like FTX, only allow users that have passed their level 2 KYC to be able to use the stock spot market via the blockchain, and secondly, the investor must not be a member of a restricted location or country. Once the customer passes his/her 2nd KYC level, the individual can begin trading these assets.
Trading Fees, API calls, GUI instructions are the same as trading cryptocurrency. This service is available 24/7 on the platform.
It’s important to know the price of a tokenized stock is not necessarily the same as the actual stock due to some factors. The prices can be a little higher or lower depending on the crypto exchange, though such price parity is reasonably low.
Still, tokenized stocks offer users a smooth payment experience, low transfer and transaction fees, and bolstered risk management, as a retail investor can afford to trade low quantities without restrictions since crypto exchanges will permit users to purchase fractions of shares such as pricey stocks like Google and Tesla.
Finally, these revolutionary financial instruments are traded round the clock like cryptocurrencies, though the flip side is, they can’t be liquidated when the traditional market is closed.