Key takeaways
Tokenised stocks are digital representations of traditional company stocks.
They enable fractional ownership of shares, making it possible to buy a portion of stock.
Tokenised stocks don’t need to follow fixed market hours in the same way traditional stocks do.
Tokenised stocks are built on blockchain and powered by smart contracts, offering faster settlements and greater transparency.
Tokenised stocks are reshaping how we think about investing, making traditional investments more accessible, flexible, and liquid. Whether you’re an experienced investor or just getting started, tokenised stocks can open the door to new global opportunities.
In this post, we’ll break down what tokenised stocks are, how they work, and how they compare to regular stocks.
What are tokenised stocks?
Tokenised stocks are blockchain-based tokens that represent ownership in traditional company shares, such as Apple or Tesla. Each token is backed by actual shares held in custody, and its price tracks the real-time value of the underlying stock. This gives investors the same market exposure as buying the actual shares, but with the added benefits of blockchain: global accessibility and trading outside traditional market operating hours.
How do tokenised stocks work?
Tokenised stocks are backed by actual shares held in custody by a regulated institution. When you buy a tokenised stock, this institution (known as the issuer) creates tokens that represent the underlying shares.
The concept works in a similar way to USD stablecoins, like USDC, which are tokenised representations of US dollars. For every USDC in circulation, the issuer holds $1 in reserve. The same principle applies to tokenised stocks: if there are $1 million worth of tokenised Tesla shares in circulation, the issuer ensures there are $1 million of actual Tesla shares held in custody to fully back the tokens.
Tokenised stocks and ownership
When you buy tokenised stock, you’re buying the token itself, not an actual share certificate registered in your name. This means that you aren’t privy to shareholder voting rights or other benefits enjoyed by shareholders.
How do tokenised stocks compare to traditional stocks?
Traditional stocks | Tokenised stocks |
Trade during market hours only | Trade 24/5 on digital platforms |
Usually need to buy whole shares | Fractional ownership is possible |
Settled via clearing houses | Settled on blockchain |
Managed by brokers & exchanges | Managed by decentralised networks |
How are tokenised stocks created?
In the past, stock ownership came with paper share certificates. Today, most of this is digital, and shares are held electronically in an account through brokers or other custodians. In this digital system, intermediaries called clearing houses and depositories keep official records of who owns what and make sure trades are settled properly.
In the same way that these paper share certificates were digitised, tokenised stocks are digital carbon copies (tokens) of the underlying shares, but instead of being dependent on clearing houses and depositories, they are traded and stored on a blockchain.
There are three main parties involved in tokenising stocks:
The issuer: A regulated financial institution that creates the tokenised stock program. The issuer is responsible for legal compliance, token creation, and ensuring proper backing of tokens with the underlying shares.
Custody holder: A licensed custodian bank that physically holds the actual shares. This custodian is regulated and insured, providing security for the underlying assets that back your tokens.
Investment platform: An investment platform like Luno where investors can buy and sell tokenised stocks.
Let’s walk through a practical example of investing in $100 worth of tokenised Amazon stock to understand how the entire process works from start to finish.
Investing - Say you decide to invest $100 in tokenised Amazon stock through Luno. At the current price of roughly $220 per share, your $100investment would purchase approximately 0.45 tokens, representing 45% of one Amazon share.
Token creation and backing - When you invest, the issuer ensures that sufficient Amazon shares are held in custody to back your tokens.
Digital token issuance - The issuer creates digital tokens on a blockchain equivalent to your investment amount. These tokens are directly linked to the performance of the underlying Amazon shares held by the custodian.
Token storage - Your $100 of Amazon share is stored in your digital wallet on Luno. You can view your holdings, track performance, and execute trades using the platform.
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Frequently Asked Questions
1. What is a tokenised stock?
A tokenised stock is a blockchain-based token that represents ownership in a traditional company share. Its price tracks the real-time value of the underlying stock, giving you the same market exposure with the added benefits of blockchain technology.
2. Are tokenised stocks backed by real shares?
Yes. When you buy a tokenised stock, a regulated institution (the issuer) holds actual shares in custody to fully back the tokens in circulation, similar to how USDC holds $1 in reserve for every token issued.
3. Do I get shareholder voting rights with tokenised stocks?
No. You own the token, not a registered share certificate. That means you don’t get voting rights or other traditional shareholder benefits.
4. Can I buy fractional tokenised stocks?
Yes. Fractional ownership is one of the key advantages. Rather than needing to buy a whole share, you can invest any amount.
5. When can I trade tokenised stocks?
Tokenised stocks trade 24/5 on Luno, unlike traditional stocks which are restricted to market hours. Settlement happens on-chain rather than through traditional clearing houses.
