Microsoft and others tell crypto platform not to tokenize their stocks
gizmodo.com98 points by gumby 3 days ago
98 points by gumby 3 days ago
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.
So why not just buy the shares? The only possible reason to sell them is to allow yourself to print shares you don’t own and scam people.
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.
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?
Certainly in the UK, but probably in many places, conversion of any kind triggers capital gains tax.
You still have to pay capital gains taxes on direct crypto->crypto transactions.
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.
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.
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.
You want transactions to be easily reversible?
Payment for order: what data was sold (or do you mean the orders as data)?
You mean broker as in a pure broker, not broker-dealer?
What about policing algorithms, for example? Who'd do that and how?
Who provides liquidity? Just natural supply and demand?