A brand new product has arrived in the crypto-asset sphere! The digital tokens actions, in French.
These equity tokens are indexed to the value of the underlying share. That is, if the value of the share increases, the value of the equity token increases as well.
Share tokens are over-the-counter derivatives (transactions concluded directly between the seller and the buyer) and they are non-fungible (not interchangeable).
On the other hand, the underlying share is a normal share traded on the markets and is fungible.
The first two platforms to offer this type of product were Binance and FTX. It is possible to buy these tokenized shares while staying within the digital asset ecosystem, which can be tax-advantageous.
Once these tokens are purchased, the platform (or service provider) directly buys the underlying shares to guarantee the value of these tokens. It is even possible to receive dividends via the tokenized shares.
Below are the 6 stocks that can currently be purchased on the Binance platform. Prices are at market value. Currently, it is only possible to buy them with BUSD, the stablecoin of Binance.
On the other hand, holding these tokenized shares does not grant you any shareholder rights. You will only be able to benefit from the rise (or fall) of the share price as well as the dividends.
Share tokens are open for purchase only during US market hours.
To buy these shares, it is necessary to first have an account with Binance as well as validated identity verification. In addition, the jurisdiction of certain countries does not allow the purchase of this type of share.
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What can this new innovation bring you?
A tax advantage
If you have already realized capital gains in the world of digital assets, then you can get exposure to the world of equities through these tokenized shares without this purchase being a taxable event. On the other hand, you will not be able to avoid the 30 % tax on capital gains in France, the day you convert these tokenized shares into euros or FIAT dollars.
A diversification benefit:
Purchasing shares via these tokenized stocks allows you to diversify your portfolio. It is well known that volatility and risks in crypto-assets are very high.
It is therefore important to know how to «take these profits» and diversify into less volatile and less risky assets.
An accessibility advantage:
Buying shares via a securities account or a PEA may require minimum amounts. For example, buying a whole share may be mandatory and can therefore bring the minimum investment to €1,000 or €500.
Tokenized shares are fractionable and allow you to buy portions of shares, bringing the minimum investment down to around twenty euros.
The disadvantages:
This solution remains a doubly centralized service. This means there are risks of «failure» associated with both entities, not only Binance, but also the trusted third party they use for the actual holding of the shares.
There is also the classic risk associated with the drop in the purchased share.
There are also other technological risks associated with the issuance of the tokenized share.
This brief overview will help you better understand this new product as well as its pros and cons. Do your own research, invest only in what you understand, and with amounts you can afford to lose.
Tristan
