As of January 7, a new digital exchange out of Estonia and Israel will allow investors to trade major US stocks after hours by tokenizing them into a virtual stock offering.
DX.Exchange will offer digital securities backed on a 1:1 ratio by stocks in 10 Nasdaq companies, including Apple, Facebook, and Tesla. The virtual stocks will be tokenized using the Ethereum blockchain and backed by shares bought and held by Cyprus-based DX.Exchange partner MPS MarketPlace Securities Ltd.
Virtual stock holders look set to receive the same cash dividends as available from the real shares themselves. Traders will be able to speculate on the Nasdaq stocks even when the New York exchange is closed, and the platform will allow buyers to purchase a fraction of a share.
This would provide investors the ability to trade in smaller values, via the partial shares, something that has attracted many to the cryptocurrency markets. Cryptocurrency platforms allow any denomination of purchase.
Traditional share-buying only allows investors to buy an entire share, so for Tesla at today’s share price the minimum purchase would be a single share at around $300. Conventional stock purchases usually also have higher fees than cryptocurrency exchanges.
The new platform could also open up a way for foreign investors to speculate on US stocks. DX.Exchange, says Bloomberg, will be overseen by US regulators but is licensed by the Estonian Financial Intelligence Unit.
CEO Daniel Skowronski says DX.Exchange saw an untapped market opportunity to tokenize traditional securities:
“We believe that this is the beginning of the traditional market’s merge with blockchain technology. This is going to open a whole new world of trading securities old and new alike.”
Tokenization, the process of allocating virtual value to real-world assets in order to move them to blockchains like Ethereum, is growing.
It’s being applied to anything from videogame in-game assets and game currencies to real estate and now traditional stocks and shares. In November 2018, for instance, a group of blockchain proponents set about tokenizing a Picasso painting.
Brian Quintenz, a commissioner of the US Commodity Futures Trading Commission (CFTC), called tokenization anything from a marketing ploy to a method of creating secondary markets while speaking at a seminar in Bulgaria on April 30, 2018.
Melanie Kramer is a freelance FinTech, blockchain, and cryptocurrency writer based between France and Canada. Melanie has studied, and retains an avid interest in, global politics, business, and economics.
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