A new start-up based in Estonia has stated they will begin allowing the buying and selling of tokenized stocks starting this Monday.
“We, at DX.Exchange, are launching the First Regulated & Digital Stocks Exchange of the world! Connecting Markets, each Digital Stocks is backed 1:1 with Real Stocks,” says Amedeo Moscato, Chief Operating Officer at DX.Exchange.
We were unable to reach them for comments to see how this would work, but on their very flashy website, they say:
“MPS MarketPlace Securities, Ltd, under the supervision of the Cyprus Regulator, CySEC, purchases real world stocks, in accordance to token demand in the DX.EXCHANGE platform.
They generate smart contracts, ERC20 tokens created on Ethereum’s network to represent those stocks. The tokens offered for sale are be based on leading public company shares listed on the biggest exchanges like NASDAQ, NYSE, Hong Kong Exchange and Tokyo Stock Exchange.
Each Dx.exchange customer, interested in Digital Stocks, is asked to go over an additional small approval form with Term & Conditions, MIFID 2 compliant, where he will need to approve to enter into an agreement with MPS for buy/sell of Digital Stocks.
MPS MarketPlace Securities, Ltd is the trust holder of the stocks on behalf of the token holders. Since Digital Stocks are not like CFDs with leverage, there are no carrying costs for the token holders. Each token is backed 1:1 by one share of real stock. These shares are held in a segregated account.”
That means this is basically Tether, but with stocks rather than dollars. The same problems thus would apply, such as how do we know they really do hold the stocks.
We could not find the smart contract, but one can imagine it could be a copy of USDC’s smart contract, but for stocks rather than dollars.
This significant level of centralization probably means theres a considerable level of regulatory barriers. The exchange says they are regulated, but we’re not sure if that is misleading because in providing further detail, they say:
“Coins Marketplace Technologies OÜ holds two operating licenses with the Estonian Financial Intelligence Unit.
License Number FVR000051 is for providing services to exchange virtual currencies against fiat currencies, and License Number FRK000039 is for providing a virtual currency wallet service. Customers FIAT funds are kept in a segregated custody account.”
MPS Marketplace Securities Ltd does have a license from Cyprus’ Securities and Exchanges Commission (SEC), allowing them to act as a broker.
The exchange apparently had an airdorp and a pre-sale, with it unclear whether they plan to have an ICO. Just as it is unclear whether US’ SEC would be satisfied with the tokenization of stocks.
They require registration for any exchange that lists securities. There would then presumably be numerous requirements and other complications for a stock derivative (token) which can freely move across the globe.
Whether SEC’s jurisdiction applies to a company based in Estonia, however, is not very clear, but they did close a contracts for difference stock exchange which had its founder based in Austria.
DX is slightly different and appears to be the first attempt to tokenize stocks. Proposals of doing it in a more decentralized way have been made, with an obvious method being a copy pasting of DAI, but with modifications to track a stock rather than USD.
It is not clear whether anyone is currently working on a stocks DAI, but with the rise of decentralized finance, it may be just a matter of time before we need only MetaMask to trade all global stocks.