Binance Plans Return of Tokenized Stock Trading After Three-Year Pause

TLDR

• Binance confirmed plans to reintroduce tokenized stock trading after shutting down the service in 2021 due to regulatory pressure from UK and German authorities.
• The exchange first launched stock tokens in April 2021 for companies like Tesla, Coinbase, MicroStrategy, Apple and Microsoft before halting operations three months later.
• Other major exchanges including OKX, Coinbase, NYSE and Nasdaq are exploring or seeking approval for tokenized stock offerings.
• Stock tokens allow investors to buy fractional shares of companies on blockchain networks that mirror real-time prices of underlying assets.
• US crypto market structure legislation could create barriers for tokenized equities, with Coinbase CEO Brian Armstrong calling the current bill a “defacto ban” on such products.

Binance has confirmed it is exploring plans to bring tokenized stock trading back to its platform. The world’s largest crypto exchange shut down its stock token service in July 2021 after facing regulatory scrutiny from European authorities.

A Binance spokesperson told reporters on Friday that offering tokenized equities is “a natural next step” for the company. The exchange wants to bridge traditional finance and cryptocurrency markets while maintaining regulatory compliance.

Stock tokens are digital representations of shares in publicly traded companies. They allow investors to buy fractional portions of stocks on blockchain networks. These tokens mirror the real-time price movements of the underlying shares they represent.

First Attempt Ended in 2021

Binance originally launched its stock token service in April 2021. The exchange started with Tesla shares before expanding to include other technology companies. Coinbase, MicroStrategy, Apple and Microsoft were among the offerings available to users.

The service operated for just three months. Germany’s financial regulator BaFin raised concerns about whether the tokens violated securities laws. The UK’s Financial Conduct Authority issued an order in June 2021 requiring Binance to halt regulated activities in the country.

By July 2021, Binance announced it was ceasing support for all stock tokens. The exchange removed the products from its platform entirely.

The company has since expanded into other tokenized assets. Binance began supporting tokenized real-world assets last year. The exchange also launched regulated perpetual contracts for traditional finance products that settle in stablecoins.

Industry-Wide Interest in Tokenized Stocks

Binance is not alone in pursuing tokenized equities. Several major players in both crypto and traditional finance are exploring similar offerings.

OKX, another large crypto exchange, is investigating stock token products according to statements from its global managing partner. Coinbase is also reportedly looking to add tokenized stocks to its platform.

Traditional exchanges are joining the movement too. Both the New York Stock Exchange and Nasdaq have sought regulatory approval to launch their own stock token products. These applications are currently pending with US financial regulators.

Regulatory Challenges Remain

The path forward for tokenized equities faces legal hurdles. The US Senate Agriculture Committee and Senate Banking Committee are both working on legislation to establish digital asset market structure. The agriculture committee scheduled a markup of its bill for Tuesday.

The banking committee’s markup was postponed indefinitely after Coinbase withdrew its support. Coinbase CEO Brian Armstrong posted on social media on January 14 that the current market structure bill would function as a “defacto ban on tokenized equities” if passed as written.

Armstrong called for changes that would allow the SEC to exempt certain tokenized offerings from standard securities regulations. Other groups including banking associations and lawmakers have raised concerns about provisions related to stablecoin rewards, conflicts of interest and decentralized finance.

Code changes to Binance’s application programming interface in December suggested the platform was preparing infrastructure for stock trading features. The exchange did not confirm these plans at that time.

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