Stock Token: The Frontier of a New Round of Asset Innovation

Recently, some well-known fintech companies and cryptocurrency exchanges have launched stock token services, attracting widespread attention in the market. This innovative product offers investors a completely new way to trade stocks, which is worth exploring in depth.

Stock tokens of certain US-listed fintech companies

The company recently launched a highly anticipated stock token service in the EU market, providing European users with an innovative stock trading model. Users can purchase derivatives tracking stock prices priced in USD, and the company will automatically complete the EUR conversion, charging a 0.1% exchange fee.

Core Mechanism

1. Custody and Mapping: These tokens are derivatives that track prices, with the underlying assets securely held by a U.S.-licensed institution. The company is responsible for issuing these contracts and recording them on the blockchain. Due to the derivative nature of the tokens, the corresponding securities can only be held in the company's account, and users cannot redeem them directly.

2. Regulatory Compliance: This service is offered as a derivative contract under the MiFID II framework. The exchange previously acquired by the company holds an MFT license, which complies with the EU's licensing requirements for companies providing derivative trading services. Currently, this service is only available in the EU region.

3. Trading Hours and Corporate Actions: Initially, trading is available five days a week, from Monday 02:00 to Saturday 02:00 Central European Time/DST. For corporate actions such as dividends, bonuses, and splits, the company will act on behalf of the clients, including position adjustments, cash distributions, and dividend payments.

4. Application of Blockchain Technology: The issuance of stock tokens utilizes blockchain technology, initially based on a certain Layer2 blockchain, with plans to migrate to the company's self-built Layer2 blockchain in the future.

5. Private Equity Market Expansion: As part of the cryptocurrency promotion program, the company has for the first time achieved access to private equity through blockchain technology, launching tokenized stocks of two well-known technology companies to European users. This innovative initiative is made possible by the relatively flexible regulatory environment in the European Union, allowing ordinary investors to access equity in unlisted companies that is typically only available to insiders and high-net-worth investors.

Stock Tokens of a Certain Cryptocurrency Exchange

In contrast, the stock token design of this exchange is more open and aligns better with the native characteristics of cryptocurrencies.

core mechanism

1. Custody and Mapping: A financial company is responsible for purchasing and custody of actual stocks or ETF assets, stored in a compliant third-party custody institution. Each Token is 1:1 pegged to the underlying asset, and the custody process is subject to strict regulation. The Token is based on a high-performance public chain and represents a fractional ownership of the underlying stocks or ETFs. The price is synchronized in real-time with the traditional market through oracles.

2. Regulatory Compliance: The exchange actively collaborates with global regulatory authorities to ensure that tokens comply with local regulations. Strict KYC and AML processes are implemented, and all users must undergo identity verification. Currently, it is only open to non-U.S. customers and does not support users from markets such as the U.S., Canada, the U.K., the EU, and Australia.

3. Trading Time and Company Behavior Handling: Supports 24/5 trading (all day Monday to Friday), breaking the traditional time limits of the US stock market. On-market trading can still be conducted during off-hours. Traditional shareholder rights are not provided, but economic benefits such as dividends are indirectly distributed through the Token price adjustment mechanism.

4. Blockchain Applications: Based on a high-performance public chain, using the token standard of that chain. Plans to expand to other high-performance blockchains in the future to enhance interoperability and market coverage.

5. Issuance situation: The first batch includes 60 US stocks and ETFs, including several technology giants and major index ETFs. They are also tradable on multiple centralized and decentralized platforms, expanding market coverage.

Comparison of Two Modes

The first company has clear advantages in compliance and coverage among mainstream audiences, and offers unlisted stocks; while the second company covers more regions and supports native on-chain transactions and DeFi protocols, making it closer to the cryptocurrency ecosystem.

For entrepreneurial teams, participating in the issuance of new stock token assets may face intense competition. Currently, there seem to be two types of potential opportunities:

1. Provide services targeted at specific demographics or regions, similar to the logic of replacing traditional brokers, aiming at areas and populations that traditional finance struggles to reach but cryptocurrency can cover.

2. Financial product innovation, after stock tokens are included in the asset pool, entrepreneurial teams can offer new derivative assets and trading strategies, such as high-leverage contracts, leveraged ETFs, etc., to form differentiated competitive advantages.