As much teeth as they want to have. If you're having to center your business model around using a VPN to avoid regulation, you're opening the door to a great white shark.
Stocks are already tokens. "Tokenizing" stocks makes no sense, if one assumes quite reasonably that "tokenization" involves giving token-ness to something that was not already a token. What it is is wrapping what is already a token in another token, mostly so the second token can get around the limitations of the first. But some of those limitations are incidental and can be eliminated at any time by the underlying token provider, mostly because nothing stops a conventional stock market from being tradeable 24/7. They already are if you're in the club anyhow, per all the "aftermarket" and "pre-market" trading you hear about around quarterly release times.
The rest of the limitations are regulatory, and if the wrapping token can get access to regulatory approval to do their thing, so can the stocks.
The whole thing feels skeevy as all get out to me. It feels like someone telling me that they'll be happy to hold my mortgage between me and the current holder. There is no good reason for that. Frankly there is already a disturbing amount of indirection in the way you don't actually own the stocks you think you do, but they're held on behalf of you on behalf of your broker at the Depository Trust & Clearing Corporation. Adding another layer of indirection makes me worry about the motives of the people who are very excited about being that layer.
Again, that's not true. As a matter of law, a bank balance is a debt the bank owes to you. An NFT or a bitcoin is a row in a spreadsheet that records the exchange of notional nothings.
A BTC is not notional nothing. What determines the value of a thing? The market does. Not you. The market. And the market has determined that BTC has value, and that's been true now for 16 years and counting.
At any rate, to the tokenized stock example, if you are purchasing a tokenized stock represented by a company such as Robinhood, it too is a debt in that the token is exchangeable for the underlying.
This is an even higher level of guarantee than, say, an options contract, in that the reserves are provable. It does, of course, involve trust in the intermediary, just as your bank balance does. But at any rate, this financial technology is an expansion of what isolated databases provide to the market.
There's no conflict: Markets can remain irrational for a long time and they can certainly place a high value on notional nothing. This piece of cardboard is worth $500,000 https://www.pokevalues.com/card/illustrator-pikachu-japanese... but at least that is rare and has a cute pokemon on it.
If a company chooses to list its stock on a blockchain instead of the NASDAQ, then, sure that has the same value as a traditional stock.
Write down the definition of a token. Write down the definition of a stock. If you look at them carefully you'll at least see a lot of overlap. For bonus points, write down not the actual definition of a token but the definition of a token its advocates want you to use; it is particularly this one that in my opinion is already what a share of stock is.
I can say you need to be careful. It sounds like you've written in to the definition of a "token" that it is "meaningless", and that is a philosophical overreach, not an accurate statement. As the reply chain correctly tried to point out, nothing stops the same process that turns your abstract, "meaningless" number that represents your shares of stock into a meaningful number from being applied to a block chain token. Our entire economy is made from top to bottom out of "meaningless" things given meaning by convention, law, and other forces. Getting too reductionistic leaves you confused about not just tokens but a lot of things.
And on the flip side, if you actually dig in to what a "share of stock" that "you" "own" is, it is already not "some fractional ownership that carries legal rights and a claim on assets" and is already more complicated, abstract, and partial than you think. Just as the token advocates want you to think of a token as something more than it is, the stock system is not in a hurry for you to understand what it is you actually hold, but it certainly is not simply some fractional ownership in the simple way you probably have in mind, and there are more exceptions and caveats and legal ways you don't really own it as much as you think already in the system. It's already more a mere "token", in the sense you originally meant, then you realize.
Like all cryptocurrency, it's optimised for evading laws and law enforcement. Fraud, evading sanctions, doing things with fake stock that would be prosecuted by financial watchdogs if it were real stock, grifting people into thinking they're buying real stocks, the list goes on.
I suppose it also allows for trading stock without paying brokerage fees (though you need to pay the network in other ways) and it permits trading for people who cannot get access to dollars or the market of origin because of local laws and/or corruption.
Honestly, it's kind of genius. All of the tools that caused the Great Depression combined with cryptocurrency grifting. Someone will make a lot of money off this.
Blockchain makes a ton of sense as a replacement for the NSCC which is the entity that actually keeps track of the ledger for ownership. But again whenever I say things like that the people that come out of the woodwork are crypto bros vs skeptics which this isn't about the cyberpunk antigovernment anonymous future but just a better cryptographically proven multiparty database.
I would probably make trade settlement faster and lower overhead costs.
Clearing equities trades with a blockchain between brokers would be beneficial in plenty of ways that are really only all that interesting to very large banks and broker services companies. (like Citadel for example)
- 24 x 7 trading is open to retail (no more waking up finding out the market moved out of hours and your stop loss didn't execute because the price moved 'though' it)
- Fractionalization (you can buy $12 worth of NVDA easily)
- Fundraising (you can raise public money without needing the large caps of traditional public markets)
- Distribution - smart people that know math publish a whitepaper and get investors into their strategy immediately rather than waiting for a hedge fund or bank to get them to market.
- Composability - eg, I invested in an app that let's people use the HNWI
'buy/borrow/die' technique as a wealth building strategy - talk into any shop, buy somethng, pay using as small loan taken out of your share holdings.
24/7 liquidity and near instant settlement, easier access for international investors, and ability to plug token into other apps and products onchain like Aave lending, providing liquidity, etc.
They are permisionless protocols, I don’t see how they can even forbid it. It shows a level of ignorance or ingenuity which I can comprehend.
There are also memecoins which as they rise, buy the underlying stock.
Being totally naive and asking an honest question: who or are they protecting themselves from? These instruments in reality are at most paired assets but most times have nothing to do with the real stock.
No, they are not. You can trade a tokenized stock on top of a blockchain that happens to be permissionless, but you can also fully operate a permissioned protocol on top of a permissionless network. How many permissioned products run on top of TCP/IP (a permissionless protocol)?
Smart contracts enable any sort of logic that you can encode in a Turing-complete software language, including authorization controls, or awaiting offchain KYC checks, or whatever your heart desires.
Memecoins don't have anything to do with real stock, but tokenized stocks trend towards the underlying's price as long as they are redeemable for the underlying in a timely manner.
Taxes only apply to net profits. Some trades create losses. At any rate, tax rates vary dramatically by jurisdiction, with some jurisdictions paying zero tax for trading-based profit.
It sounds enough like real investing that it might make some more people put real money into crypto, while still being unregulated and vague enough that you can outright steal the money or take risks a regulated market wouldn't allow
Or you meant an argument for the person putting their money into it? No idea.
I guess the target audience are countries where capital gains on stocks are high-to-ridiculous but simultaneously capital gains on crypto are low for whatever reason or the tax free amount on crypto gains is relatively high. Germany comes to my mind as an example.
I just Googled about this. In Germany, long term holdings of crypto (> 1 year) are tax free regarding capital gains. However, this ends for any new purchases on/after Jan 1 2027.
> capital gains on stocks are high-to-ridiculous
Google tells me it is about 28%. Is this considered high? It is about one half regular income tax rates. That seems like a pretty good discount to me.
Hot take: Given the state of wealth inequality and that the vast majority of capital gains go to a tiny fraction of people, why do we still have lower taxes for capital gains? Maybe it has out-lived its usefulness/purpose.
Germany has the highest number of billionaires in Europe. Those contributing the worst to wealth inequality are paying minuscule taxes through family offices and charities arranges in Netherlands, Luxembourg, and Lichtenstein. High capital tax gain on capital market results with people loading their poultry savings into gold bars and crypto.
> Germany has the highest number of billionaires in Europe.
It is better to use number of billionaires per capita. That would be: Monaco, Liechtenstein, Guernsey, Cyprus, Switzerland, Sweden.
> Those contributing the worst to wealth inequality are paying minuscule taxes through family offices
I did some Googling. It looks like they are using Familienstiftungen (family foundations). They pay much lower taxes than regular income tax. Yeah, I am with you on this one: It is bullshit that they can pay lower taxes.
One thing that I wish more countries did to handle large inheritances: Make people pay a relatively high inhertiance tax (say 25-50%), but grant them a state-backed low interest loan to repay the inheritance tax over 15-30 years. My hottest take: Make there almost no exemptions (farms, family homes, etc.) and no minimum. Any well-run, but private business, should easily be able to pay this back within the timeframe. Also, it would protect family-owned businesses, which I know is an important cultural consideration in Germany, thanks to Mittelstand.
Stock is owned by Cede & Co anyway. So everything downstream is just ledgers. What differs is how much you trust the record-keeper, and what legal rights the entry gives you.
this won't really matter much because even if tokenization of stocks is banned you can just create perpetual futures that settle on the price of the real stock. so if you are a crypto only investor (due to your country preventing open capital markets or other restrictions) you will put your money there and then some intermediaries with access to both tradfi markets with actual stock and access to the crypto perpetual futures markets will provide the liquidity and keep prices in sync.
Perpetuals are OK for trading, but not good for holding as a long-term investments - usually you need to pay interest on any open position.
I guess the appeal of tokenized stock is to do things regulators don't want you to do (e.g. evade capital controls). Otherwise one can just access market directly through a broker.
I've looked at the xyz:SP500 contract on hyperliquid and it's funding rate seems to be negative most of the time. Currently the annualized rate is around -0 to -2%, so if you hold a long position over a year you will roughly earn 1% on top (negative funding rate means short positions pay funding to long positions). This makes sense because the no-arbitrage principle requires this to be roughly in line with holding an actual SP500 basket and receiving dividends. And you don't pay interest on open positions, you are just holding a derivative and need to meet margin obligations - but you can leverage as much as you are comfortable with.
Is there really some pricing going on with infinite dividend and funding legs and/or is there sort of supply and demand "cost of carry" thing in the perpetual world?
I'd expect given all the counter party risk you are taking on that you should be paid a small rate to take on a perpetual future or tokenized stock.
Otherwise when the market goes bankrupt you'll be left with nothing and you won't have gotten compensated for the risk of holding the perpetual future or tokenized share.
> Otherwise when the market goes bankrupt you'll be left with nothing and you won't have gotten compensated for the risk of holding the perpetual future or tokenized share.
As someone who "held" multiple bitcoin on TradeHill I must say: this sounds exactly like how crypto works ...
I don't think US investors are the target here. They can already make bets on the SP500 in a number of ways: ETFs, futures, options etc. - unless you wanna make a highly leveraged bet which traditional broker margin requirements will prevent. The tradfi venues are probably even a bit cheaper (though we are talking about a few bps difference).
Cyberpank is having a really nice and modern mobile app for your bank but all the interface doesn't give you any hint that transfering money out of the country is even possible.
Sure but wasn't the whole pitch of tokenization, RWA, all of this cycle's narrative, that crypto could function as an investment vehicle for the normie retirement account holder, that it wasn't just derivatives and speculating on short-term price movement?
This is ridiculous. Every investment bank have been issuing wrapper instruments like 144a/regS notes/0 strike calls & warrants/swaps/fully collateralised performance notes etc etc against public equity since forever. This is not new and displays a large degree of illiteracy by large corporates and the public in general.
"Goldman Sachs doesn't know what they are talking about" in reference to a stock maneuver is pretty unlikely to be true.
Even beyond GS, some of these companies are among the most sophisticated financial institutions on the planet.
The article says 22 companies have commented, but more have commented since it was written, or maybe the original article missed a few. Those companies include the list below.
I’m trying to understand what tokenized stocks actually mean. Where does the value come from? A stock is an actual percentage of a company’s ownership. A token of a stock is basically an NFT of a stock? The value is only from what other people are willing to pay for it?
Company A will accept funds to buy some stock like MSFT, then they will mint a token i.e. xMSFT that you'll own in a blockchain ledger. You can trade this for whatever you want but the company promises to buy any token xMSFT at MSFT price whenever you want[1]. So the tokenized asset remains pegged as long as there's trust in the institution.
Also, the company will grow a balance sheet out of the funds created by the owners of the tokens and they frequently will give you some sort of yield on your position.
[1] Open Market hours and usually accompanied by a fee.
Not a crypto person, but is it a situation where one may have crypto and wants to invest it without converting it to USD/CAD/JPY/etc.. and paying taxes on it?
Minor benefits around clearing and settlement, but these allow for 24/7 even if the clearing house is not so. On the other hand, I don’t see how they should be able to block it. It is a derivative product, can MSFT block e.g. puts on its stock? Stock ownership gives rights, not obligations.
The other thing would be using it in any other automated whatever that accepts tokens with the same interface. Loans, escrow, trades, whatever it is that someone has built.
There's a lot of technical and other issues with blockchains, but framed as "a single shared database that allows stored procedures and shared data types, with no central owner" I'd hope devs here could see something interesting to mess about with there. If it wasn't for the fact that "a currency" is absurdly easy to make and then there was a lot of quick money to be made or lost, I think it'd be liked more as an odd shared network.
If nothing else, there's some interesting programming challenges involved given the compute limits.
I'm assuming that, like most crypto, the benefits are for the exchange. They don't have to purchase any Microsoft stock. They can just sell virtual stock, invest the crypto in whatever they want, and only have to pay back when people actually want to sell it. And like the fractional reserve system, they hope that only a small fraction want out at any given time.
Microsoft loses because all of that investment activity does nothing to help their valuation, but the middlemen in the crypto market take their share on each transaction.
There’s many countries around the globe where buying US shares is either impossible or prohibitively expensive. Also composability in DeFi protocols.
For the issuer, same playbook on how stables issuers print money - you get cash that you can put into treasuries to earn “free” yield on. Works as long as rates aren’t zero.
Shares should simply just be tokens. Why do we have that complex systems where shares can only be traded by regulated entities (brokers) and only be traded during certain times? If a share is a token, the holder of the token will be entitled to the same rights such as dividends collection and voting in the shareholder meeting. No need for brokerage accounts, I can trade my shares 24/7 and transfer it to whomever I want. Paying 2-5$ fees on trades seem backwards this day and age.
> Why do we have that complex systems where shares can only be traded by regulated entities (brokers)
Because it safeguards against fraud and tax evasion.
> Paying 2-5$ fees on trades seem backwards this day and age.
Many brokerages don’t charge for buying or selling stock. They make their money elsewhere, likely with contracts on calls/puts. But to your point, having to pay a variable rate fee for moving my Ethereum from one wallet I own to another wallet I own also seems silly. I’m certain though that in both cases the charges cover the maintenance costs to keep the platform going. Everything comes at a cost.
I didn't say anything about decentralized blockchain or anonymous tokens. We could have a kyc process and a single centralized blockchain run by the stock exchange, which only settles transactions to kyc customers - fraud prevention and tax evasion applies.
The real-time trading independent of brokerages, the free information flow of trading volume/direction etc. all benefits and a true, real free market. Right now we have mountain of unneeded intermediaries, that sit and cash in on the data and access.
Would you expect exchanges to permit everyone to trade directly? How would you police the consequences of, for example, no entry policing? How would you want to police requirements if everyone is on the exchange or some venue (e.g., around algorithms)?
But complexities of any new system aside, what is an example of a cashing in of an unneeded example in terms of an activity?
You public key is registered with a kyc progress. Transactions (transfer of shares) is only settled when all parties have a kyc-verified key. Again, centralized chain (proof of authority). Any and all transactions can be reversed and changed by the regulator if needed. The main difference over today is, you have a open, access-to-all (after kyc) and no intermediaries.
Examples for cashing in: payment for order flow (was recently banned in the EU). They litterally sold their trading data of retail clients for money.
Not sure how you think brokers make money, but they get kickbacks from market makers and fund providers, or simply higher spreads. No one works for free.
To make a long story short, and because I'm not an expert: A similar thing kinda-sorta happens behind the scenes with retail investing anyway. When you buy and sell stocks online, often the real ownership of the stock, in the stock exchange, doesn't change hands. Instead, the stock is exchanged among customers of the same platform.
IE, if you buy and sell stocks on ETrade, most of the time the ownership with the dow doesn't change, instead the ownership within ETrade's database changes.
Have you ever tried to actually buy and hold a stock yourself without a middlemen like a brokerage actually holding it for you? It's a very annoying and sometimes almost impossible process.
This is just a different kind of middlemen with different trade-offs.
I guess because it's easier to trade USDT for stock tokens in an Ethereum contract. Same reason USDT is on the blockchain and not just a database run by its owners, who are already centralized of course.
There are also a lot of examples of contracts with some centralization that would appear to remove the entire point of using a blockchain, but they're simple enough that the blockchain is actually easier than running their own servers, dealing with auth, keeping hackers out, etc.
Value comes from the underlying. Of course you are carrying some intermediary risk but that's also inherent with stock brokers as well. Similar to a stablecoin backed by treasuries. Voting isn't the only value of holding stock, although some platforms have proposed passing through to token holders voting and dividend distributions as well.
One of the primary benefits for traders is 24/7 liquidity and the ability to plug the token into other products onchain, like lending markets.
The value of stock buybacks come from lowering shares in circulation. Fewer shares means that shareholders have to share profits with fewer, leading to larger profits or dividends per share.
The cash for buybacks comes from company operations, which they give to investors in exchange for destroying the outstanding security. The cash for Ponzi schemes comes from other investors, which they receive in exchange for issuing more securities and use to fund investors who want to cash out. They are in many ways opposites.
> The cash for Ponzi schemes comes from other investors, which they receive in exchange for issuing more securities and use to fund investors who want to cash out.
If the value of something is only "someone else will pay for it, and then later they will sell it", that to me is effectively the same as a Ponzi scheme. There's no inherent value in the actual thing being bought and sold other than the buying and selling of it. Maybe calling them "Pokemon cards for companies" would be a better way of describing why I find it nonsensical to claim there's any real link between the company and the stock unit when buybacks are the only way to make money off them.
Sounds like the “blockchain” part of this is marketing, since it’s on a private blockchain controlled by the exchange. The real selling point is 24/7 trading.
The mechanism is usually that you can exchange tokenized stocks for real stocks for some fee. That causes prices to be similar.
Another similar instrument is perpetuals, which are kept close to the price of the underlying by having people who hold long positions pay people who pay short positions, or vice versa, when the price deviates. (This is called funding.)
The ultimate goal of tokenized stocks is that the token is a share - just represented on the public blockchain instead of in the databases of companies like Fidelity. So in this respect, it's just changing the record keeping system. We're not quite there yet, but that's the vision.
Why would you do this? Current stock trading often takes a day or so to actually settle - you execute a buy but it doesn't settle immediately. There is room for leverage and counter-party risk to live in that gap.
Tokenized stocks (or any asset) is building towards atomic on-chain settlement - you have stock in MSFT, I have stablecoins, we perform an atomic transfer where you send me MSF and I send you stablecoins. This speeds up the system and eliminates counterparty risk. We each must have the asset ready to trade at this point in time.
The benefit is faster settlement, not keeping capital locked up because of long settlement times and decreasing the space where leverage and counter-party risk can live.
Longer term - this potentially means it could be easier for non-US parties to buy US stocks. I can put my savings in the stock market, but a farmer in a developing country cannot. But with tokenized shares, they could invest in US equities - or even a fraction of a US equity if they cannot afford a full share. So this longer term vision could democratize global access to capital markets.
What the fuck? How can you just turn someone else’s stock into a “token” and then list it on a stock exchange and sell it 24/7?
This would be like me printing out my own pieces of paper I call Munchkin Shares, and selling you Munchkin Shares in Google. Come buy shares in Google! 100% authentic munchkin shares!
Look at swap contracts. They are pretty standard financial agreements that are just otc agreements between 2 parties and they are frequently pegged to an exchange traded price with none of the underlying contract obligations.
Tokenization is and of the tech isn’t sketchy at all. That it’s mostly used to get around the regulations something like swap contracts are for is.
I avoid participating in any market unless I have to, these days.
Crypto is a scam within a scam. It was created to act as a 'good cop' to the 'bad cop' which is the mainstream system. But they are two sides of the same scam. Same kind of game of Republican vs Democrat. Everywhere you turn, there is a scammer waiting to take your money.
> For now, crypto platforms do not need proactive permission from the companies whose stocks they want to tokenize under the SEC’s Innovation Exemption, which was issued last month after the Clarity Act stalled in the Senate. Instead, platforms must notify the company, which then has 30 days to object
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[ 0.18 ms ] story [ 11.4 ms ] threadDo they actually have a legal say in the matter?
The rest of the limitations are regulatory, and if the wrapping token can get access to regulatory approval to do their thing, so can the stocks.
The whole thing feels skeevy as all get out to me. It feels like someone telling me that they'll be happy to hold my mortgage between me and the current holder. There is no good reason for that. Frankly there is already a disturbing amount of indirection in the way you don't actually own the stocks you think you do, but they're held on behalf of you on behalf of your broker at the Depository Trust & Clearing Corporation. Adding another layer of indirection makes me worry about the motives of the people who are very excited about being that layer.
Crypto tokens are just some meaningless entries on a blockchain.
At any rate, to the tokenized stock example, if you are purchasing a tokenized stock represented by a company such as Robinhood, it too is a debt in that the token is exchangeable for the underlying.
This is an even higher level of guarantee than, say, an options contract, in that the reserves are provable. It does, of course, involve trust in the intermediary, just as your bank balance does. But at any rate, this financial technology is an expansion of what isolated databases provide to the market.
If a company chooses to list its stock on a blockchain instead of the NASDAQ, then, sure that has the same value as a traditional stock.
I can say you need to be careful. It sounds like you've written in to the definition of a "token" that it is "meaningless", and that is a philosophical overreach, not an accurate statement. As the reply chain correctly tried to point out, nothing stops the same process that turns your abstract, "meaningless" number that represents your shares of stock into a meaningful number from being applied to a block chain token. Our entire economy is made from top to bottom out of "meaningless" things given meaning by convention, law, and other forces. Getting too reductionistic leaves you confused about not just tokens but a lot of things.
And on the flip side, if you actually dig in to what a "share of stock" that "you" "own" is, it is already not "some fractional ownership that carries legal rights and a claim on assets" and is already more complicated, abstract, and partial than you think. Just as the token advocates want you to think of a token as something more than it is, the stock system is not in a hurry for you to understand what it is you actually hold, but it certainly is not simply some fractional ownership in the simple way you probably have in mind, and there are more exceptions and caveats and legal ways you don't really own it as much as you think already in the system. It's already more a mere "token", in the sense you originally meant, then you realize.
If it's not happening on a GPU, is it really a "token"? ;-)
I suppose it also allows for trading stock without paying brokerage fees (though you need to pay the network in other ways) and it permits trading for people who cannot get access to dollars or the market of origin because of local laws and/or corruption.
Honestly, it's kind of genius. All of the tools that caused the Great Depression combined with cryptocurrency grifting. Someone will make a lot of money off this.
I would probably make trade settlement faster and lower overhead costs.
Clearing equities trades with a blockchain between brokers would be beneficial in plenty of ways that are really only all that interesting to very large banks and broker services companies. (like Citadel for example)
https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...
- Fractionalization (you can buy $12 worth of NVDA easily)
- Fundraising (you can raise public money without needing the large caps of traditional public markets)
- Distribution - smart people that know math publish a whitepaper and get investors into their strategy immediately rather than waiting for a hedge fund or bank to get them to market.
- Composability - eg, I invested in an app that let's people use the HNWI 'buy/borrow/die' technique as a wealth building strategy - talk into any shop, buy somethng, pay using as small loan taken out of your share holdings.
There are also memecoins which as they rise, buy the underlying stock.
Being totally naive and asking an honest question: who or are they protecting themselves from? These instruments in reality are at most paired assets but most times have nothing to do with the real stock.
No, they are not. You can trade a tokenized stock on top of a blockchain that happens to be permissionless, but you can also fully operate a permissioned protocol on top of a permissionless network. How many permissioned products run on top of TCP/IP (a permissionless protocol)?
Smart contracts enable any sort of logic that you can encode in a Turing-complete software language, including authorization controls, or awaiting offchain KYC checks, or whatever your heart desires.
Memecoins don't have anything to do with real stock, but tokenized stocks trend towards the underlying's price as long as they are redeemable for the underlying in a timely manner.
Isnt this offset by large taxes when you have to convert your coin back to real currency?
Or you meant an argument for the person putting their money into it? No idea.
Hot take: Given the state of wealth inequality and that the vast majority of capital gains go to a tiny fraction of people, why do we still have lower taxes for capital gains? Maybe it has out-lived its usefulness/purpose.
One thing that I wish more countries did to handle large inheritances: Make people pay a relatively high inhertiance tax (say 25-50%), but grant them a state-backed low interest loan to repay the inheritance tax over 15-30 years. My hottest take: Make there almost no exemptions (farms, family homes, etc.) and no minimum. Any well-run, but private business, should easily be able to pay this back within the timeframe. Also, it would protect family-owned businesses, which I know is an important cultural consideration in Germany, thanks to Mittelstand.
I guess the appeal of tokenized stock is to do things regulators don't want you to do (e.g. evade capital controls). Otherwise one can just access market directly through a broker.
Otherwise when the market goes bankrupt you'll be left with nothing and you won't have gotten compensated for the risk of holding the perpetual future or tokenized share.
As someone who "held" multiple bitcoin on TradeHill I must say: this sounds exactly like how crypto works ...
Even beyond GS, some of these companies are among the most sophisticated financial institutions on the planet.
The article says 22 companies have commented, but more have commented since it was written, or maybe the original article missed a few. Those companies include the list below.
Alphabet
AppLovin
Applied Digital
Applied Optoelectronics
Arm Holdings
Caterpillar
Cerebras
Cisco Systems
CoreWeave
Goldman Sachs
Intuit
Marvell Technology
McDonald's
Microsoft
Moderna
Qualcomm
Rocket Lab
UnitedHealth Group
Verizon
Wells Fargo
Also, the company will grow a balance sheet out of the funds created by the owners of the tokens and they frequently will give you some sort of yield on your position.
[1] Open Market hours and usually accompanied by a fee.
There's a lot of technical and other issues with blockchains, but framed as "a single shared database that allows stored procedures and shared data types, with no central owner" I'd hope devs here could see something interesting to mess about with there. If it wasn't for the fact that "a currency" is absurdly easy to make and then there was a lot of quick money to be made or lost, I think it'd be liked more as an odd shared network.
If nothing else, there's some interesting programming challenges involved given the compute limits.
Microsoft loses because all of that investment activity does nothing to help their valuation, but the middlemen in the crypto market take their share on each transaction.
I say that so definitive because there is no reason at all to do this other than avoiding the existing banking system.
For the issuer, same playbook on how stables issuers print money - you get cash that you can put into treasuries to earn “free” yield on. Works as long as rates aren’t zero.
Because it safeguards against fraud and tax evasion.
> Paying 2-5$ fees on trades seem backwards this day and age.
Many brokerages don’t charge for buying or selling stock. They make their money elsewhere, likely with contracts on calls/puts. But to your point, having to pay a variable rate fee for moving my Ethereum from one wallet I own to another wallet I own also seems silly. I’m certain though that in both cases the charges cover the maintenance costs to keep the platform going. Everything comes at a cost.
The real-time trading independent of brokerages, the free information flow of trading volume/direction etc. all benefits and a true, real free market. Right now we have mountain of unneeded intermediaries, that sit and cash in on the data and access.
But complexities of any new system aside, what is an example of a cashing in of an unneeded example in terms of an activity?
Examples for cashing in: payment for order flow (was recently banned in the EU). They litterally sold their trading data of retail clients for money.
Not sure how you think brokers make money, but they get kickbacks from market makers and fund providers, or simply higher spreads. No one works for free.
IE, if you buy and sell stocks on ETrade, most of the time the ownership with the dow doesn't change, instead the ownership within ETrade's database changes.
This is just a different kind of middlemen with different trade-offs.
But what is the crypto value here? Why not just a database row?
Blockchain tokenization is only for high risk negative reward people.
There are also a lot of examples of contracts with some centralization that would appear to remove the entire point of using a blockchain, but they're simple enough that the blockchain is actually easier than running their own servers, dealing with auth, keeping hackers out, etc.
And decentralization here doesn’t mean a lot when you need to trust the broker with real stocks backing.
One of the primary benefits for traders is 24/7 liquidity and the ability to plug the token into other products onchain, like lending markets.
Stock broker customers have SIPC to reduce risk. Is there an equivalent entity for the crypto token space?
Somehow every time I try to make this argument about stock buybacks, some people vigorously defend them as not just somehow a glorified Ponzi scheme.
How do you see that as a Ponzi scheme?
The cash for buybacks comes from company operations, which they give to investors in exchange for destroying the outstanding security. The cash for Ponzi schemes comes from other investors, which they receive in exchange for issuing more securities and use to fund investors who want to cash out. They are in many ways opposites.
If the value of something is only "someone else will pay for it, and then later they will sell it", that to me is effectively the same as a Ponzi scheme. There's no inherent value in the actual thing being bought and sold other than the buying and selling of it. Maybe calling them "Pokemon cards for companies" would be a better way of describing why I find it nonsensical to claim there's any real link between the company and the stock unit when buybacks are the only way to make money off them.
Sounds like the “blockchain” part of this is marketing, since it’s on a private blockchain controlled by the exchange. The real selling point is 24/7 trading.
Another similar instrument is perpetuals, which are kept close to the price of the underlying by having people who hold long positions pay people who pay short positions, or vice versa, when the price deviates. (This is called funding.)
Why would you do this? Current stock trading often takes a day or so to actually settle - you execute a buy but it doesn't settle immediately. There is room for leverage and counter-party risk to live in that gap.
Tokenized stocks (or any asset) is building towards atomic on-chain settlement - you have stock in MSFT, I have stablecoins, we perform an atomic transfer where you send me MSF and I send you stablecoins. This speeds up the system and eliminates counterparty risk. We each must have the asset ready to trade at this point in time.
The benefit is faster settlement, not keeping capital locked up because of long settlement times and decreasing the space where leverage and counter-party risk can live.
Longer term - this potentially means it could be easier for non-US parties to buy US stocks. I can put my savings in the stock market, but a farmer in a developing country cannot. But with tokenized shares, they could invest in US equities - or even a fraction of a US equity if they cannot afford a full share. So this longer term vision could democratize global access to capital markets.
I see he still has trouble with the concept of "consent".
Do I need someone's consent to write 'msft' on a piece of paper?
asset tokenization doesn't have to be tied to crypto.
the legit use cases for crypto i.e people in poor countries etc are not exactly a demographic for VCs or investors to pump money into.
Where to issue, what are the costs and what system to use?
This would be like me printing out my own pieces of paper I call Munchkin Shares, and selling you Munchkin Shares in Google. Come buy shares in Google! 100% authentic munchkin shares!
Tokenization is and of the tech isn’t sketchy at all. That it’s mostly used to get around the regulations something like swap contracts are for is.
Crypto is a scam within a scam. It was created to act as a 'good cop' to the 'bad cop' which is the mainstream system. But they are two sides of the same scam. Same kind of game of Republican vs Democrat. Everywhere you turn, there is a scammer waiting to take your money.
> For now, crypto platforms do not need proactive permission from the companies whose stocks they want to tokenize under the SEC’s Innovation Exemption, which was issued last month after the Clarity Act stalled in the Senate. Instead, platforms must notify the company, which then has 30 days to object