In the very first week of 2019, DX.Exchange, the cryptocurrency exchange, which was launched on the basis of Nasdaq, published in its twitter information about the launch of a new platform. The main feature is that it will have the opportunity to purchase shares of such world giants as Google, Apple, Facebook, Microsoft, etc. The purchase process is implemented using tokenized shares and cryptocurrency deposits. Below we analyze how this is an attractive step and whether it can affect the improvement of interaction between the two industries, classical and cryptocurrency.
The principle of operation and capabilities of the platform DX.Exchange
The trading platform DX.Exchange will provide an opportunity to buy tokens that will be assigned to shares of large tech giants like Amazon, which are listed on the Nasdaq exchange. To simplify the process of trading tokenized shares and prevent market manipulation attempts, a matching mechanism from the Nasdaq exchange will be used.
The deposit can be opened using BTC, BCH, ETH, LTC, DASH and XRP as payment. At the same time, the process of buying securities is different from the classic one. At DX.Exchange, not direct ownership of the selected shares is acquired, but through the purchase of special tokens that represent specific securities.
The ratio of tokens and shares is provided for 1 to 1. When acquiring an asset, the user is the owner of both cryptocurrency and company shares. This approach demonstrates how to invest in securities of Facebook companies using cryptocurrency.
The acquisition of securities directly will be carried out with the help of the Cyprus firm MPS Marketplace Securities Ltd. It is with them that the platform DX.Exchange entered into a corresponding agreement. MPS buys stocks depending on the demand of customers and for each generates its ERC-20 token. Given that DX.Exchange follows the rules of the European Union, and the MPS is under the jurisdiction of the Cyprus Securities and Exchange Commission, each user must undergo a KYC and AML verification procedure. In addition, the option of using the Nasdaq protocol for the exchange of financial information is being considered.Perhaps, as an alternative, the FIX protocol will be implemented, which a number of US securities trading companies use according to the standard. Due to the presence of the API interface through which you can trade, this makes it possible to integrate the platform with algorithmic traders, liquidity providers, hedge funds and various market makers. The advantage of DX.Exchange along with the classic stock exchanges will be around the clock. This was also noted by Dan Doni, the founder of the Securrency fintech company, saying that access to trading 24 hours a day is an added convenience and liquidity for investors.
Tokenization of shares as a new stage in the development of the securities trading industry
A new growth impulse for the crypto bank can be offered by placing classic securities on the blockchain. Well-known cryptanalysts are increasingly beginning to talk about this. This process describes the term security token, which is a “digitized” share. Thus, a digital asset based on the blockchain technology appears due to the transformations of classic stocks and their fixed income. One token corresponds to one share of a particular company and guarantees the same amount of dividends. With the help of security token there is a new opportunity to purchase securities. At the same time, no intermediaries are needed, because his role is being replaced by the blockchain.
An important nuance on which Dan Doni focuses is the need to get consent from corporations to trade their shares using cryptocurrencies. In an interview with CCNBC, he stressed that the tokenization of shares without the consent of the company’s shareholders is unacceptable. This is the main reason why the director of Securrency is skeptical of the model, which is provided for on the DX.Exchange platform. But given that the exchange uses the resources of Nasdaq, in its case this is not necessary. Nasdaq has all the necessary arrangements, and given the fact that all the requirements of the European Union on the part of DX.Exchange are met, there are no legal violations.
Based on this, we can conclude that the tokenization of shares may well fit into the regulatory standards. It is only necessary to coordinate the activities of the platform and act within the rules of the placement of securities. Such an interaction between the classical and cryptocurrency industries can bring stock trading to a fundamentally new level.
How does the US promote the development of tokenization of shares?
Very soon, the future may come, in which companies will race to try to tokenize their shares that are listed on the classic stock exchanges. Given that the state governors are already making statements in support of the cryptographic market, one can assume that such a future is even closer than it seems. As an example, we take the same Wyoming state, where last month we prepared a bill according to which corporations can create a digital asset on the basis of the blockchain and tokenize shares.
In less than six months, this can become a reality. According to the document, the digital transfer of so-called certificate tokens, which represent the shares, is permitted, and they must be stored in the blockchain. It is also good that the bill provides for the presentation in the form of tokens of all or part of the shares, at discretion.
By the way, this is not the only bill in Wyoming that concerns cryptocurrency. Two more documents have appeared, the purpose of which is to contribute to innovations in the field of cryptocurrency and blockchain through the creation of a regulatory environment. In one of them, a new asset format is clearly described, which defines tokens with designated consumer characteristics as intangible personal property. According to the second draft law, the creation of a regulatory test environment is initiated, which should contribute to the adaptation of the necessary laws and regulations for the effective use of innovation.
Summing up, we can safely say that the tokenization of shares is not just an idea, but a fact that has already taken place. This year we will be able not only to observe the development of this industry, but also to take a direct part in this. The launch of sites where it is possible to try out the idea of ”live”, positive changes on the part of state regulators, all this suggests that the market for classic securities is waiting for a new interesting revolution. And the more successful this interaction is, the more it will affect the cryptocurrency market in a positive way. But this will only happen in the future, and if you are interested in the topic of stocks for a crypt, we recommend that you, for a start, familiarize yourself with the ordinary market through our free materials.