Kraken and Bybit Unveil Tokenized Stocks for Global Investors
Major Crypto Exchanges Launch Tokenized Stocks and ETFs for Global Investors
Kraken and Bybit Introduce Access to U.S. Equities
In a significant move, leading cryptocurrency exchanges Kraken and Bybit have partnered with Swiss-based Backed to provide tokenized stocks and ETFs. This initiative is aimed at non-U.S. investors seeking simplified access to American equity markets.
High-Profile U.S. Stocks Available in Tokenized Form
The new service features prominent U.S. stocks, including well-known tech giants, Nike, Walmart, and Exxon Mobil, all available in a tokenized format. This development allows international investors to easily acquire fractional shares of U.S. stocks, while crypto enthusiasts can manage these Solana-based tokens alongside their other digital assets in their wallets.
A Revolutionary Approach to Stock Ownership
Arjun Sethi, co-CEO of Kraken, emphasized the groundbreaking nature of xStocks, stating, “We’re not just introducing a new product; we’re fundamentally changing how people can own and utilize shares of tokenized stocks. Users can transfer, hold, spend, or leverage these assets directly from their wallets without intermediaries, borders, or delays.”
Fee Structure and Ownership Details
Kraken has eliminated trading fees for transactions made in USD or the USDG stablecoin, although spreads will still apply. It’s important to note that token holders do not possess the underlying stocks directly. Instead, dividends are reinvested into additional token holdings rather than distributed as cash, with the tokens being fully backed by actual shares held by Backed.
Understanding the Risks Involved
While the service claims to reduce reliance on intermediaries, it introduces new risks. Kraken’s terms of service outline potential vulnerabilities related to the exchange’s operations, Backed’s financial health, counterparty risks, legal complexities, and liquidity issues. The market for tokenized stocks, such as TSLAx, is likely to be less liquid than that of the actual Tesla shares, which could complicate selling when needed.
Verification and Transparency Challenges
To ensure transparency, Backed utilizes Chainlink’s Proof of Reserves system, which connects custodians through APIs. Verification is conducted by the Network Firm, a specialized accounting service in the crypto space. However, the effectiveness of this verification hinges on independence. When attestation firms become too integrated within the industry, they may face conflicts of interest that could undermine their oversight capabilities.
This issue is not exclusive to the cryptocurrency sector; it also arises when auditors become too close to the industries they are tasked with evaluating. Ideally, periodic audits by external firms not involved in the technical processes would enhance trust, especially since the underlying assets are traditional in nature.
Progress Toward Greater Transparency
Despite the challenges, the implementation of a proof of reserves system marks a significant advancement in transparency as the cryptocurrency sector evolves. The current iteration of the tokenized stock market shows considerable improvement over earlier versions from 2018, which often raised concerns about their legitimacy. Nevertheless, investors must carefully consider the convenience of this new offering against the additional risks it entails.
