![]() ![]() “I don’t understand why people in the digital asset space aren’t just actually issuing tokens that represent equity for real,” said Chong, the Fusang CEO. “We don’t sell short and we are not selling the order flow to market makers like Robinhood.” The disadvantage of having no physical headquartersĪ big question, for some cryptocurrency-industry veterans, is why Binance didn’t use its own blockchains to mint the tokens.īinance has two blockchains: Binance Chain, focused on high-speed transactions, and Binance Smart Chain, to host decentralized finance applications and other digital assets. “We take the same position as the clients,” the company’s representative said. And the real question is, who’s on the other side? And is it collateralized to the point where you trust the process?”ĭigital Assets AG said it is not taking any short positions against the underlying stocks, unlike some CFD (contract for differences) providers in traditional finance. What you basically have is a side bet on the company. “You are not going to have all of the rights of ownership if you own one of these tokens. “How can you actually trust that token is what it says it is?” Angel asked. James Angel, an associate professor at Georgetown University’s McDonough School of Business, praised the tokenized stock as an “innovation” but said several risks could arise for people who want to use it. “CM-Equity AG has the license to sell securities and financial instruments.” “It is a financial instrument where people are buying, and that’s why Binance is a tied agent of CM-Equity AG,” a DAAG representative said. The underlying shares are put into a security account associated with CM-Equity AG, and Digital Assets AG sends the token through CM-Equity to Binance. A token is then minted on a private blockchain by Digital Assets. The process works like this: Once a Binance user opens a trade in stock tokens, a Swiss company called Digital Assets AG (DAAG), on behalf of a German firm called CM-Equity AG, purchases the corresponding amount of the company’s shares. The representative said it’s “expected” that there would be an “identical move” in the price of the token whenever the underlying stock goes up or down. “Stock tokens entitle the holders to gain economic exposure to the underlying shares in a convenient and trusted manner,” a Binance representative said in an email about whether the stock tokens should be considered a security. “I think that’s what is getting really uncomfortable right now.”īinance says the new stock tokens, provided in concert with a German firm, are compliant with European market regulations. “Their marketing has been very aggressive, and they’ve used that term ‘stock’ very heavily,” said Henry Chong, chief executive at Labuan-based digital stock exchange Fusang. ![]() Yet, red flags have already been raised by regulators in different countries and regions, over the possibility Binance’s new push might run afoul of securities rules. The tokens are fully backed by shares held by CM-Equity AG, a licensed and fully regulated asset management firm in Germany, according to Binance. They’re settled in Binance’s dollar-linked stablecoin, binance USD (BUSD). The exchange's timing was notable because the launch came just a few days before Binance's biggest U.S.-based competitor, Coinbase, started trading through a direct stock listing on Nasdaq.Īccording to Binance, its new service would let users buy “stock tokens” – representing public companies’ shares or even fractions of shares. Binance, the world’s largest cryptocurrency exchange, has pushed into a wide range of businesses in recent years in pursuit of profit and industry dominance – from sponsoring its own blockchain, to backing a decentralized exchange, to launching its own “utility token,” BNB, now trading at an $87 billion market capitalization.īut it’s Binance’s latest venture – a foray into trading tokenized versions of stocks of Tesla, Apple and Coinbase – that’s now threatening to bring unwanted attention from national and regional regulators.īinance launched a "stock token" trading service on April 12. ![]()
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