Binance signed Tesla tokens, meaning that exchange users can now buy Tesla tokens that represent a fraction of the company’s stock. Users can buy fractions of the token, with a minimum transaction size of one centimetre of the token.
Binance CEO Changpeng Zhao said: “Stock tokens demonstrate how we can democratise the transfer of securities more smoothly, reduce friction and costs on accessibility, without compromising on compliance or security.”
So, this token fragmentation makes it very affordable considering that a Tesla stock is currently trading at around $700.
Zhao had stated earlier this year that such a move was being considered. Referring to a similar service offered by FTX, he said: “We try to copy innovation, when innovation is good”.
As with FTX and Bittrex Global, Binance partnered with German financial services company CM Equity AG and Switzerland-based Digital Assets AG, which specialises in converting tokens.
This service is provided by Binance free of charge, and the business model of the exchange regarding this service is not yet clear.
FTX charges for the provision of a corresponding service that in the rest of its services, i.e. from 2 to 7 basis points, depending on the volume of the transaction.
As Sam Bankman-Fried, CEO of FTX, states:
“We allow third parties, who share their identities with us and CM-Equity AG, to create, redeem and provide liquidity.”
While Binance advertises its service as “commission-free”, the exchange could charge a spread / cash-out spread, according to Bankman-Fried, who added that “Binance could be the only player in the market“.
On the other hand, while the Binance exchange operates during the traditional market hours, the Tesla stock badge, for example, will follow the Nasdaq, FTX and Bittrex Global offer 24/7 stock exchanges.
“The badges of the shares are fully supported by shares, the trades of which are carried out in real time. Therefore, the buying and selling of the badges of these shares follow their trading times. Each badge is fully supported by a portfolio of underlying securities which represents pending discreet. Our partner CM-Equity AG, an asset management company, licensed in Germany and wholly owned, assigns the shares acquired to a third-party brokerage firm for custody. In addition, CM-Equity AG will monitor all trading activities for compliance with the regulatory framework. ”
Binance stock tokens are priced and settled in BUSD, which means that users can buy and redeem these tokens. FTX stocks, on the other hand, refer to “USD stablecoin”, which means that users can buy and redeem with a variety of options, such as the US dollar, as well as USDC, BUSD, HUSD and PAX Standard stablecoins.
Stock badges are not stocks. They are products that provide exposure to underlying shares and potential corporate actions, including dividends and stock splits. Binance will record other badges in the future, depending on market demand.
To get started with this Binance service, you must first identify yourself by submitting an identity document and verifying your identity. Residents of Germany will need an additional proof of residence, while the service is not available in the US, mainland China, Turkey and some other, currently unknown countries.