Tokenized Stocks Expand Access to US Equities via Kraken and Bybit

Leading cryptocurrency exchanges kraken and Bybit are now providing tokenized stocks and Exchange Traded Funds (ETFs) through Backed’s xStocks platform. This initiative aims to give investors located outside the united States simpler access to the American stock market. The move reflects a growing trend of integrating traditional financial assets with blockchain technology, perhaps democratizing investment opportunities for a global audience.

Tokenized Stocks: Bridging Crypto and Traditional Finance

The xStocks platform offers tokenized versions of high-profile U.S. stocks, including major tech companies, Nike, Walmart, and exxon Mobil. This allows non-U.S. investors to gain fractional ownership in these companies, while crypto users can hold these Solana-based assets directly in their digital wallets alongside other cryptocurrencies. This integration could streamline investment processes and reduce barriers to entry for international investors.

Did You Know? The global tokenized asset market is projected to reach $8.6 trillion by 2030, according to a report by Statista.

Benefits of Investing in Tokenized Stocks

Arjun Sethi, co-CEO of kraken, emphasized the transformative potential of xStocks: “With xStocks, we’re not launching a novelty. we’re unlocking something foundational. For the first time,people all over the world can own and use a share of a tokenized stock like they would use money. You can move it, hold it, spend it, or borrow against it.All from your wallet, with no intermediaries, no borders, and no delays.”

Kraken does not impose trading fees for users paying in USD or the USDG stablecoin, although spreads are applicable.Dividends are reinvested into additional tokens, and the tokens are backed one-to-one by real shares held by Backed. This structure aims to provide a seamless and efficient investment experience.

Risks and verification Challenges

Despite the advantages, tokenized stocks introduce new layers of risk. Kraken’s terms highlight potential exposure to the exchange’s operational and technological vulnerabilities, Backed’s financial stability, counterparty failures, legal complexities, and liquidity constraints. The market for a tokenized version of a stock,such as TSLAx,will likely be smaller than the market for the actual Tesla stock,potentially making it more arduous to sell quickly.

Pro Tip: Before investing in tokenized stocks, carefully review the terms and conditions of the exchange and the backing entity to understand the associated risks.

Verification and Openness

Backed uses Chainlink’s Proof of Reserves system, linked to custodians via APIs, to provide attestations. Verification is conducted by The Network Firm, a crypto-focused accounting service. Though, the effectiveness of verification depends on independence. Auditors heavily specialized in the crypto industry may face pressure to maintain client relationships,potentially compromising their oversight role.

A higher standard would involve periodic verification by auditors external to the crypto ecosystem who have not been involved in the technical integration process. The underlying assets are, after all, conventional.However, the implementation of a proof of reserves system represents significant progress toward transparency in the maturing tokenized asset sector.

Tokenized Stock Platforms: A Comparison

The current generation of tokenized stock offerings is significantly more robust than earlier iterations from 2018. However, investors must carefully weigh the convenience against the additional risk layers involved.

What are your thoughts on the future of tokenized assets? Do you think this will revolutionize investing?

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult with a qualified financial advisor before making any investment decisions.

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