Are tokenized stocks a new threat to the FX/CFD industry?

Rick Steves

“The Retail FX/CFD industry got burned offering CFD’s on #Crypto in late 2017. Then shied away from Crypto. Now the crypto exchanges are offering synthetic equities and indexes. Retail #CFD brokers can not compete”, said Mr.Leahy, who once was a leader within the FX/CFD trading industry, including top roles at oneZero Financial Systems and FX Primus.


Binance has listed a tokenized version of Tesla Inc. stock which can be traded by non-U.S. based users. They will now gain access to the country’s $47 trillion stock market with no particular regulatory hurdles.

Changpeng Zhao, Chief Executive Officer at Binance, said: “Binance serves many users around the world and we are very pleased to be able to help them participate in the equity market.

“Stock tokens demonstrate how we can democratize value transfer more seamlessly, reduce friction and costs to accessibility, without compromising on compliance or security. Through connecting traditional and crypto markets, we are building another technological bridge for a more inclusive financial future.”

The zero-commission, tradable stock token was responsible for $10 million in traded volume on its first day, according to the firm, which is not significant compared to the TSLA stock AVD of nearly $57 million. Still, $10 million AVD would be among the 100 most liquid coins.

Binance’s Tesla token is backed by a share of the underlying stock through a partnership with German financial firm CM Equity AG, a BaFin-regulated investment firm that operates proprietary trading and brokerage services.

Other way to go at it is with synthetic stand-ins for the stocks, which is the modus operandi of Terraform Labs’ Mirror Protocol. This method uses an oracle system that cross-references the token price against its real counterpart.

Synthetic assets are able to circumvent onerous regulatory barriers, including capital gains taxes on foreign equities, capital controls, as well as provide access to global markets in financially disenfranchised regions or politically dislocated areas.

Coinbase, which doesn’t offer stock tokens at least not yet, is about to go public today. The arrival of IPOs onto the crypto market is a significant development. Coinbase plans to post its shares straight on the Nasdaq stock exchange via a direct listing.

Andrew Bull, founding legal partner at Bull Blockchain Law, told Bloomberg it’s only a matter of time until U.S. regulators approve tokenized stocks.

“The U.S. will undoubtedly allow for tokenized stocks to trade at some point in the future, but like the current Bitcoin ETF situation going on in the U.S., the transactional timeline for where funds come from in the token context is not yet satisfactory,” said Bull. “Adoption will most likely take significantly longer due to regulatory hurdles that may simply boil down to a desire to stick with the current infrastructure.”

Stephen Leahy, Director of Business Development for the Trading Markets department at Circle, commented on these recent developments on Twitter.

“The Retail FX/CFD industry got burned offering CFD’s on #Crypto in late 2017. Then shied away from Crypto. Now the crypto exchanges are offering synthetic equities and indexes. Retail #CFD brokers can not compete”, said Mr.Leahy, who once was a leader within the CFD trading industry, including top roles at oneZero Financial Systems and FX Primus.

In October 2020, Mr. Leahy provided valuable insights into the world of digital assets, crypto CFDs, and its ban in the UK.

“I believe a few of the major DA (and some that have yet to be created) are the future of finance and will be the assets and platforms that are used by the finance sector in coming years to facilitate frictionless transactions for consumers, and instant settlement of payments between financial firms and their clients. So I believe wholeheartedly in Digital Assets. But I want CFD’s banned too” explained Mr Leahy.

“Why?, well I want to speed the move to Digital Assets by all. I do not want legacy financial service firms to get in the way of adoption. And while trading and liquidity of DA is important, I want people to experience being “un-banked”. Buy some DA and hold it yourself on your mobile wallet, transfer value instantaneously to anyone you choose in seconds with almost zero costs ($1 or $1million), access your wealth from anywhere on the planet with an internet connection” he said.

“Digital Asset CFD’s just add layers of service providers between an individual and their property. I get that speculators want to speculate. But for those who have a legitimate interest in the future of finance, CFD’s add risk and put a financial entity between you and your digital asset. Get educated, buy the actuals, and hold in your own wallet” he concluded.

Read this next

Digital Assets

GK8 now allows clients to control their digital assets as they would their fiat

“As the institutional market is increasingly turning to self custody, our policy engine empowers them to automate transactions, approvals, and even crucial workflows, while providing the highest degree of security, consistency, governance and control.”

Digital Assets

Retail CBDCs in the UK: “Welcomed” by CryptoUK and R3, but “Dystopian” for ETC Group

“At this stage, we judge it likely that the digital pound will be needed in the future. It is too early to decide whether to introduce the digital pound, but we are convinced preparatory work is justified”, said the BoE and HM Treasury.

Institutional FX

Centroid taps Iress API to provide retail brokers with real-time market data

“It has always been a challenge to have an efficient, elegant solution for market data and order execution for retail brokers, but with Iress we have found absolutely the right partner to add to our client offering.”

Digital Assets

Ramp launches FCA-approved off-ramp product, onboards Brave, Trust Wallet, Ledger

“To obtain and maintain our FCA registration, we must meet and operate within their strict anti-money laundering and counter-terrorist financing standards. This is a huge achievement for us, as compliance is a cornerstone of our business and what we stand for.”

Institutional FX

State Street launches FIX API for Fund Connect ETF platform

“Expanding from proprietary APIs to the FIX industry standard will bring us closer to our goal of 100% digital interactions. This is another example of innovations we’ve brought to our operating model as we celebrate 30 years of servicing ETFs since the launch of SPY.”

Industry News

HollyWally opens office in Portugal to bring B2B2C wallet-as-a-service platform to Europe

“We looked at a number of centers for startups throughout Europe and were attracted straight away to Lisbon. There is great Government support and enthusiasm for startups, it’s well positioned between our Asian and US offices, it’s a cost-effective city in which to base a fintech and it’s a beautiful place.”

Retail FX

Eightcap integrates Acuity’s economic calendar for trade ideas on MT4 or MT5

“By incorporating Acuity’s cutting-edge AI technology into our platform, we are able to offer our clients a powerful new tool that will help them stay ahead of the markets. We are committed to providing an extensive range of tools and educational resources that will enhance our clients’ trading experience and allow them to trade smarter.”

Digital Assets

Fuse Network powers Web3 economy, payments with ‘Fuse 2.0’

Web3 payments revolution startup Fuse Network announced the release of ‘Fuse 2.0.’ alongside a new roadmap, whitepaper, and fresh branding aimed at bringing crypto payments to the mainstream global economy.

Inside View

Private Equity Renaissance

Recent years have seen a resurgence in the concept of trading physical equities, with a slew of new arrivals joining the market for what is arguably one of the oldest forms of investing. But what has been the driving force behind this change in momentum?