Microsoft and others tell crypto platform not to tokenize their stocks | Hacker News Reader

Microsoft and others tell crypto platform not to tokenize their stocks

gizmodo.com

100 pointsgumby134 comments

I’m trying to understand what tokenized stocks actually mean. Where does the value come from? A stock is an actual percentage of a company’s ownership. A token of a stock is basically an NFT of a stock? The value is only from what other people are willing to pay for it?

Company A will accept funds to buy some stock like MSFT, then they will mint a token i.e. xMSFT that you'll own in a blockchain ledger. You can trade this for whatever you want but the company promises to buy any token xMSFT at MSFT price whenever you want[1]. So the tokenized asset remains pegged as long as there's trust in the institution.

Also, the company will grow a balance sheet out of the funds created by the owners of the tokens and they frequently will give you some sort of yield on your position.

[1] Open Market hours and usually accompanied by a fee.

So why not just buy the shares? The only possible reason to sell them is to allow yourself to print shares you don’t own and scam people.

Not a crypto person, but is it a situation where one may have crypto and wants to invest it without converting it to USD/CAD/JPY/etc.. and paying taxes on it?

Certainly in the UK, but probably in many places, conversion of any kind triggers capital gains tax.

You still have to pay capital gains taxes on direct crypto->crypto transactions.

"have to" is very aspirational in that sentence

Why are paper certificates for shares no longer used?

Minor benefits around clearing and settlement, but these allow for 24/7 even if the clearing house is not so. On the other hand, I don’t see how they should be able to block it. It is a derivative product, can MSFT block e.g. puts on its stock? Stock ownership gives rights, not obligations.

The other thing would be using it in any other automated whatever that accepts tokens with the same interface. Loans, escrow, trades, whatever it is that someone has built.

There's a lot of technical and other issues with blockchains, but framed as "a single shared database that allows stored procedures and shared data types, with no central owner" I'd hope devs here could see something interesting to mess about with there. If it wasn't for the fact that "a currency" is absurdly easy to make and then there was a lot of quick money to be made or lost, I think it'd be liked more as an odd shared network.

If nothing else, there's some interesting programming challenges involved given the compute limits.

I'm assuming that, like most crypto, the benefits are for the exchange. They don't have to purchase any Microsoft stock. They can just sell virtual stock, invest the crypto in whatever they want, and only have to pay back when people actually want to sell it. And like the fractional reserve system, they hope that only a small fraction want out at any given time.

Microsoft loses because all of that investment activity does nothing to help their valuation, but the middlemen in the crypto market take their share on each transaction.

Because you're under sanctions? Because you're really investing drug money? Because ...

I say that so definitive because there is no reason at all to do this other than avoiding the existing banking system.

There’s many countries around the globe where buying US shares is either impossible or prohibitively expensive. Also composability in DeFi protocols.

For the issuer, same playbook on how stables issuers print money - you get cash that you can put into treasuries to earn “free” yield on. Works as long as rates aren’t zero.

Shares should simply just be tokens. Why do we have that complex systems where shares can only be traded by regulated entities (brokers) and only be traded during certain times? If a share is a token, the holder of the token will be entitled to the same rights such as dividends collection and voting in the shareholder meeting. No need for brokerage accounts, I can trade my shares 24/7 and transfer it to whomever I want. Paying 2-5$ fees on trades seem backwards this day and age.

> Why do we have that complex systems where shares can only be traded by regulated entities (brokers)

Because it safeguards against fraud and tax evasion.

> Paying 2-5$ fees on trades seem backwards this day and age.

Many brokerages don’t charge for buying or selling stock. They make their money elsewhere, likely with contracts on calls/puts. But to your point, having to pay a variable rate fee for moving my Ethereum from one wallet I own to another wallet I own also seems silly. I’m certain though that in both cases the charges cover the maintenance costs to keep the platform going. Everything comes at a cost.

I didn't say anything about decentralized blockchain or anonymous tokens. We could have a kyc process and a single centralized blockchain run by the stock exchange, which only settles transactions to kyc customers - fraud prevention and tax evasion applies.

The real-time trading independent of brokerages, the free information flow of trading volume/direction etc. all benefits and a true, real free market. Right now we have mountain of unneeded intermediaries, that sit and cash in on the data and access.

Would you expect exchanges to permit everyone to trade directly? How would you police the consequences of, for example, no entry policing? How would you want to police requirements if everyone is on the exchange or some venue (e.g., around algorithms)?

But complexities of any new system aside, what is an example of a cashing in of an unneeded example in terms of an activity?

You public key is registered with a kyc progress. Transactions (transfer of shares) is only settled when all parties have a kyc-verified key. Again, centralized chain (proof of authority). Any and all transactions can be reversed and changed by the regulator if needed. The main difference over today is, you have a open, access-to-all (after kyc) and no intermediaries.

Examples for cashing in: payment for order flow (was recently banned in the EU). They litterally sold their trading data of retail clients for money.

Not sure how you think brokers make money, but they get kickbacks from market makers and fund providers, or simply higher spreads. No one works for free.

You want transactions to be easily reversible?

Payment for order: what data was sold (or do you mean the orders as data)?

You mean broker as in a pure broker, not broker-dealer?

What about policing algorithms, for example? Who'd do that and how?

Who provides liquidity? Just natural supply and demand?

https://en.wikipedia.org/wiki/Payment_for_order_flow

Sorry, I thought you just had some idea about basic financial services.

I have some fairly good understanding actually, hence my point about just data vs orders. Not sure what you want me to take from your link specifically?

To make a long story short, and because I'm not an expert: A similar thing kinda-sorta happens behind the scenes with retail investing anyway. When you buy and sell stocks online, often the real ownership of the stock, in the stock exchange, doesn't change hands. Instead, the stock is exchanged among customers of the same platform.

IE, if you buy and sell stocks on ETrade, most of the time the ownership with the dow doesn't change, instead the ownership within ETrade's database changes.

Have you ever tried to actually buy and hold a stock yourself without a middlemen like a brokerage actually holding it for you? It's a very annoying and sometimes almost impossible process.

This is just a different kind of middlemen with different trade-offs.

then Robinhood (or Coinbase or whoever) would owns all stocks and votes on behalf without consulting you. It gives them activist power in companies

Ah I understand, so it’s backed by an actual stock, and you just trust the broker to not liquidate and leave you with nothing.

But what is the crypto value here? Why not just a database row?

Because with a database row you don't risk having SEC suing you into oblivion.

Blockchain tokenization is only for high risk negative reward people.

I guess because it's easier to trade USDT for stock tokens in an Ethereum contract. Same reason USDT is on the blockchain and not just a database run by its owners, who are already centralized of course.

There are also a lot of examples of contracts with some centralization that would appear to remove the entire point of using a blockchain, but they're simple enough that the blockchain is actually easier than hosting their own API, dealing with auth, keeping ddos and hackers out, etc.

I’m pretty sure a database row backed by an app is much easier than handling crypto.

And decentralization here doesn’t mean a lot when you need to trust the broker with real stocks backing.

Database by itself is easy, but the rest of a public-facing exchange would be a lot of security to get right. I've seen contracts for blockchain exchanges, they're not that complicated, and the footguns have been figured out already. Once they set that up, they don't have to host anything publicly, or very little. The orders are typically matched off-chain, but their backend just talks to the chain, not end users.

Value comes from the underlying. Of course you are carrying some intermediary risk but that's also inherent with stock brokers as well. Similar to a stablecoin backed by treasuries. Voting isn't the only value of holding stock, although some platforms have proposed passing through to token holders voting and dividend distributions as well.

One of the primary benefits for traders is 24/7 liquidity and the ability to plug the token into other products onchain, like lending markets.

> Of course you are carrying some intermediary risk but that's also inherent with stock brokers as well.

Stock broker customers have SIPC to reduce risk. Is there an equivalent entity for the crypto token space?

> The value is only from what other people are willing to pay for it?

Somehow every time I try to make this argument about stock buybacks, some people vigorously defend them as not just somehow a glorified Ponzi scheme.

The value of stock buybacks come from lowering shares in circulation. Fewer shares means that shareholders have to share profits with fewer, leading to larger profits or dividends per share.

How do you see that as a Ponzi scheme?

I see it as a Ponzi scheme when people argue that they're a replacement for dividends. You're describing them as if dividends are an assumption, in which case they're perfectly reasonable.

Even for companies that do not pay dividends, buybacks should increase the value of each share, because you share profits with fewer other shareholders.

Buybacks raise the EPS/earning-per-share by lowering the denominator (number of outstanding shares).

EDIT:

If P/E stays the same, but the E (earnings) grows, the P (price) has to grow too.

I think it’s quite uncontroversial to equate buybacks with dividends. Personally, I prefer dividends, even if they’re suboptimal tax-wise.

I don't understand how "the value of this is that someone will buy it back from you later" to be different from a Ponzi scheme.

I can see what you mean if very speculative or whatever, but many (most?) publicly traded companies earn money and own tangible assets.

Buying shares means you own some of that; that is the value.

These companies likely pay their employees, and as a shareholder you get to partake and harvest value, without having to work for it.

If the company earns more than last year, the stock should be worth more. But of course, valuation clouds the picture, where dividends are usually simpler to model.

This just sounds like nonsense to me. Why would it be "more valuable" to have a piece of paper with the name of a company on it that makes more money on it than a company that made less money if it never translates to actually getting money from having it? You might as well be describing baseball cards, because someone else will want to pay more for a card that has a player who does really well even though they don't get anything from having it. That might be reasonable for collectors, but it's a pretty clearly insane basis for such a huge portion of our economic activity.

Again, a baseball card doesn’t earn money or do anything profitable in the real physical world. A company often does.

It’s no more “a piece of paper”, than a deed over a piece of land is. Would you also consider that “a collectible”?

You’re entitled to have your opinion, but I disagree with you on this.

They're currently a replacement for dividends because dividends are less tax-efficient than stock buybacks.

I struggle with the same initial impression as you, and have reached an uneasy peace with the status quo by telling myself that the stock price is about the amount of dividends the company could issue in a dividend-friendlier tax environment, once its growth plateaus and it goes into cash-cow mode.

I guess this is where politics comes into it, because in general I don't really like the idea of a capital gains tax at a much lower rate than income in the first place.

Yeah, I mean it's sort of galling.

However, if they're at parity then the incentive is to just squeeze your assets for as much income as possible until you run their value into the ground. Which seems like a pressure for business owners / shareholders to be even more short-sighted than they already are.

Which is also my objection to a wealth tax actually (incentive to tank paper value of all holdings).

IDK. Taxation is sort of a blunt instrument and seems woefully inefficient compared to nationalizing assets on a case-by-case basis.

> I don't really like the idea of a capital gains tax at a much lower rate than income

Completely agree about this part. I find it unethical that capital earns more than labor.

I don’t think that will ever change though, as capital also buys political power (in many countries).

That was my initial motivation for getting into dividend investing: If you can’t beat ‘em, join ‘em.

I don't think buybacks are really the thing here. The question is why a stock would have value if it doesn't pay dividends. If there's a good reason for that then buybacks are perfectly sensible. If there isn't then such companies are engaged in some sort of weird scheme regardless of buybacks.

I'd argue that if the only value of something is that you can sell it later, that is a weird. At best, it's like a collectible card or something, and at worst, it's just a Ponzi scheme.

Respectfully, I think that perspective may be too simplistic.

A collectible card doesn’t have paying customers; many publicly traded companies do. They are real businesses that make money. When they make more, the price goes up.

If you wanted to base the entirety of the world economy on baseball cards, I'd say that you're crazy. The fact that you put company names on them instead and don't make them physical cards doesn't make it less crazy.

Again, no baseball card produces anything of value in the world. Many publicly traded companies do. They employe people and pay their salaries.

You seem to ignore that.

The economy is not based on the stocks, but on the value the underlying companies produce. E.g. Tesla makes cars, Google runs a search engine. Such companies impact the real world - Baseball cards collect dust.

It’s a broken comparison.

It is a bit weird. And yet a lot of people are willing to pay a lot of money for stocks that show no sign of ever paying out dividends. Seems like it's probably more than just collecting cards.

Why would you see them as a Ponzi scheme?

The cash for buybacks comes from company operations, which they give to investors in exchange for destroying the outstanding security. The cash for Ponzi schemes comes from other investors, which they receive in exchange for issuing more securities and use to fund investors who want to cash out. They are in many ways opposites.

> The cash for Ponzi schemes comes from other investors, which they receive in exchange for issuing more securities and use to fund investors who want to cash out.

If the value of something is only "someone else will pay for it, and then later they will sell it", that to me is effectively the same as a Ponzi scheme. There's no inherent value in the actual thing being bought and sold other than the buying and selling of it. Maybe calling them "Pokemon cards for companies" would be a better way of describing why I find it nonsensical to claim there's any real link between the company and the stock unit when buybacks are the only way to make money off them.

Ponzi scheme has a very specific definition, which is that the money to pay out earlier investors comes from new investors. That's specifically the test that the FTC and SEC use to prosecute such cases. With buybacks, the money used to buy out investors comes from the operating profits of the company. Economic activity is happening, money is being exchanged for goods and services, and then the money is being returned to shareholders in accordance with the company's fiduciary duties.

Curious if you understand where the cash from a buyback comes from? That it's out of the corporate treasury, where it was previously accounted for as part of the profits of the corporation?

I can't tell if you're being condescending intentionally or not, but I'm not sure how you could get the impression that I don't understand what "buyback" means. Obviously it comes from the company; otherwise it's just a regular stock sale that doesn't need any additional descriptor.

The issue to me is that the division between "money companies get from selling their shares" and "money companies get from selling their products" is artificial; whether it gets taxed differently is a procedural issue, not something that inherently defines what "value" is. When the value of something is only from selling it again in the future, it's inherently only valuable as long as there's someone else to pass it onto to sell it again later. Sticking the company in the middle of passing it along doesn't magically change whether it's sensible or not. That's what I mean by "effectively a Ponzi scheme", even if it's not strictly one in the definitional sense. The same arguments for why a Ponzi scheme is undesirable apply.

I'm condescending to everyone; my wife, when we first started dating, was like "He doesn't mean to be condescending, but, well, he is."

> Obviously it comes from the company; otherwise it's just a regular stock sale that doesn't need any additional descriptor.

This is incorrect. A buyback is when a company buys its stock. It is giving cash to shareholders, and taking the shares back. A stock sale is the opposite, when the company sells its stock and receives money from the new shareholders. The direction of cash flow is very important here, because a key difference between a Ponzi scheme and a buyback is that in a buyback, the company is distributing cash to investors, not taking cash in.

> The issue to me is that the division between "money companies get from selling their shares" and "money companies get from selling their products" is artificial

If you're collapsing these two, you're generalizing beyond the point of usefulness, and ignoring all of the reasons why people engage in economic activity in the first place.

There are many, many industries where the consumer does not even get to sell the object again in the future. When you go out to a restaurant, the meal disappears within an hour, leaving you with just memories and indigestion. When you go to an amusement park, you have fun while you're there and leave with nothing. When you pay rent, you have a roof over your head for the month and then nothing afterwards. When you go to a casino, you get your hopes and excitement up while you're there and leave with less than nothing. When you buy alcohol or tobacco, you're spending money on the privilege of poisoning yourself.

Almost everyone would consider these legitimate economic exchanges, though. They may be inadvisable on a time-preference basis because your money disappears and you end up with nothing durable in return, but few people would argue that a large part of our economy is made up of transactions like this.

You're right though that you can take the corporation out of the equation and they still make just as much sense. If you take the corporation, its accounting statements, and the corporate treasury out of the equation, then a buyback is taking money earned from providing goods and services, and distributing it to the shareholders. The difference from a dividend is which shareholders receive the distribution: in a dividend it is distributed equally across all shareholders (who continue to remain shareholders), while in a buyback it distributes the cash to the people who least want to own the business in the future, paying them out entirely and distributing future profits to a smaller set of shareholders.

https://www.coindesk.com/markets/2026/01/19/nyse-to-launch-2...

Sounds like the “blockchain” part of this is marketing, since it’s on a private blockchain controlled by the exchange. The real selling point is 24/7 trading.

So, a very inefficient database with massive footguns.

The mechanism is usually that you can exchange tokenized stocks for real stocks for some fee. That causes prices to be similar.

Another similar instrument is perpetuals, which are kept close to the price of the underlying by having people who hold long positions pay people who pay short positions, or vice versa, when the price deviates. (This is called funding.)

The ultimate goal of tokenized stocks is that the token is a share - just represented on the public blockchain instead of in the databases of companies like Fidelity. So in this respect, it's just changing the record keeping system. We're not quite there yet, but that's the vision.

Why would you do this? Current stock trading often takes a day or so to actually settle - you execute a buy but it doesn't settle immediately. There is room for leverage and counter-party risk to live in that gap.

Tokenized stocks (or any asset) is building towards atomic on-chain settlement - you have stock in MSFT, I have stablecoins, we perform an atomic transfer where you send me MSF and I send you stablecoins. This speeds up the system and eliminates counterparty risk. We each must have the asset ready to trade at this point in time.

The benefit is faster settlement, not keeping capital locked up because of long settlement times and decreasing the space where leverage and counter-party risk can live.

Longer term - this potentially means it could be easier for non-US parties to buy US stocks. I can put my savings in the stock market, but a farmer in a developing country cannot. But with tokenized shares, they could invest in US equities - or even a fraction of a US equity if they cannot afford a full share. So this longer term vision could democratize global access to capital markets.

this won't really matter much because even if tokenization of stocks is banned you can just create perpetual futures that settle on the price of the real stock. so if you are a crypto only investor (due to your country preventing open capital markets or other restrictions) you will put your money there and then some intermediaries with access to both tradfi markets with actual stock and access to the crypto perpetual futures markets will provide the liquidity and keep prices in sync.

Perpetuals are OK for trading, but not good for holding as a long-term investments - usually you need to pay interest on any open position.

I guess the appeal of tokenized stock is to do things regulators don't want you to do (e.g. evade capital controls). Otherwise one can just access market directly through a broker.

Reduced barrier to trading too. No KYC, single USDC deposit and you can trade equities with leverage globally vs kycd traditional alternatives.

I've looked at the xyz:SP500 contract on hyperliquid and it's funding rate seems to be negative most of the time. Currently the annualized rate is around -0 to -2%, so if you hold a long position over a year you will roughly earn 1% on top (negative funding rate means short positions pay funding to long positions). This makes sense because the no-arbitrage principle requires this to be roughly in line with holding an actual SP500 basket and receiving dividends. And you don't pay interest on open positions, you are just holding a derivative and need to meet margin obligations - but you can leverage as much as you are comfortable with.

Is there some pricing going on with infinite dividend and funding legs and/or is there sort of supply and demand "cost of carry" thing in the perpetual world?

I'd expect given all the counter party risk you are taking on that you should be paid a small rate to take on a perpetual future or tokenized stock.

Otherwise when the market goes bankrupt you'll be left with nothing and you won't have gotten compensated for the risk of holding the perpetual future or tokenized share.

> Otherwise when the market goes bankrupt you'll be left with nothing and you won't have gotten compensated for the risk of holding the perpetual future or tokenized share.

As someone who "held" multiple bitcoin on TradeHill I must say: this sounds exactly like how crypto works ...

In the U.S. things like this (eg Contract for Differences) are illegal, and the SEC regulates these sort of things.

I don't think US investors are the target here. They can already make bets on the SP500 in a number of ways: ETFs, futures, options etc. - unless you wanna make a highly leveraged bet which traditional broker margin requirements will prevent. The tradfi venues are probably even a bit cheaper (though we are talking about a few bps difference).

If you want to trade MSFT in the US just... use Robinhood?

Perps aren't the same and they carry liquidation risks.

Cyberpank is having a really nice and modern mobile app for your bank but all the interface doesn't give you any hint that transfering money out of the country is even possible.

Sure but wasn't the whole pitch of tokenization, RWA, all of this cycle's narrative, that crypto could function as an investment vehicle for the normie retirement account holder, that it wasn't just derivatives and speculating on short-term price movement?

crypto still trying to find PMF beyond speculation after 10+ years is the crazy thing to me.

asset tokenization doesn't have to be tied to crypto.

the legit use cases for crypto i.e people in poor countries etc are not exactly a demographic for VCs or investors to pump money into.

They already found it with money laundering, but boosters just don't want to admit it and keep saying there will eventually be something better to be found.

Stablecoins have PMF.

such as ? mind you I love stablecoins but for a person in a normal economy they make 0 cents to use.

> Cuomo downplayed the objections in a written statement to Fortune

I see he still has trouble with the concept of "consent".

Remind me why someone needs consent to create some virtual/digital data/bytes that represent arbitrary things?

Do I need someone's consent to write 'msft' on a piece of paper?

Can anyone provide an argument for tokenized stocks, beyond just meme-coins for companies?

It's a growth play for financial services to find trading volume they otherwise cannot create. Young retail has no cashflow to speak of, so Coinbase and Robinhood target them for the house rake of trading meme stocks and crypto. The rest is institutional, broker dealer, traditional retail brokerages, etc but there's only so much revenue to be had moving existing securities around amongst those who can obtain exposure to them, managing pensions and 401ks, etc. ~93% of equities are held by the top ~10% of US households, for example.

Lots of cost inefficiency to squeeze out, but everyone is incentivized to not cannibalize other participants or their own business. "Its a big club and you're not in it" and "If you're playing a poker game and you look around the table and and can't tell who the sucker is, it's you."

If I recall, the most optimal equities market operating model is a short auction window at the open and the close to process order books, but again, no appetite for efficiency over revenue, I'll have to find the paper.

(thoughts and opinions always my own)

Most ideal equities markets operating model would be a short auction period at the open and the close

This is almost exactly aligned with real life trading experience with retail traders. Retail trader P&L map by weekday and time of day shows that the overwhelming majority of retail losses fall into one of two categories - either choppy hours during the day where liquidity is low (noise from overtrading) or 15 minutes after the NY open where the volatility spike happens and stop hunts take place.

Extending equities to 24/7 with tokenization only increases the amount of low liquidity chop, which is good for exchange fees, but not for retail expectancy.

So that people with off the books defi assets can diversify their holdings as if they bought into the non-defi world, without any of those pesky taxes or KYC requirements.

Which most governments will be strongly incentivised to prevent.

The ones that aren’t (basically rogue states under sanctions like Russia or DPRK) will have the rest of the governments very interested in preventing them from owning these securities.

It offers a way to hide wealth from countries like Venezuela, Russia, Iran, etc... Along with any other country.

By definition nothing onchain is off the books. You can download any public chain's history from genesis. Very traceable. Meanwhile KYC is pesky and onerous, but there is nothing precluding an onchain protocol from implementing KYC. Most protocols that deal with real world assets retain the ability to freeze and seize funds if required by law.

My understanding is that it's possible there will be / is a country that you don't have low cost or easy access to US stocks, but can have access to tokenized stocks. If Coinbase and others are smart, they'll collect the KYC info the US requires, regardless of where the person is in the world. In fact, that seems like the other part of this line in the article: "provided the tokens carry the same rights and privileges as the underlying shares, including dividends and voting rights."

Stocks are already tokens. "Tokenizing" stocks makes no sense, if one assumes quite reasonably that "tokenization" involves giving token-ness to something that was not already a token. What it is is wrapping what is already a token in another token, mostly so the second token can get around the limitations of the first. But some of those limitations are incidental and can be eliminated at any time by the underlying token provider, mostly because nothing stops a conventional stock market from being tradeable 24/7. They already are if you're in the club anyhow, per all the "aftermarket" and "pre-market" trading you hear about around quarterly release times.

The rest of the limitations are regulatory, and if the wrapping token can get access to regulatory approval to do their thing, so can the stocks.

The whole thing feels skeevy as all get out to me. It feels like someone telling me that they'll be happy to hold my mortgage between me and the current holder. There is no good reason for that. Frankly there is already a disturbing amount of indirection in the way you don't actually own the stocks you think you do, but they're held on behalf of you on behalf of your broker at the Depository Trust & Clearing Corporation. Adding another layer of indirection makes me worry about the motives of the people who are very excited about being that layer.

I don't think stocks are tokens? Stocks are shares in a company: some fractional ownership that carries legal rights and a claim on assets.

Crypto tokens are just some meaningless entries on a blockchain.

And your bank account balance is some meaningless entries in a SQL database

Again, that's not true. As a matter of law, a bank balance is a debt the bank owes to you. An NFT or a bitcoin is a row in a spreadsheet that records the exchange of notional nothings.

A BTC is not notional nothing. What determines the value of a thing? The market does. Not you. The market. And the market has determined that BTC has value, and that's been true now for 16 years and counting.

At any rate, to the tokenized stock example, if you are purchasing a tokenized stock represented by a company such as Robinhood, it too is a debt in that the token is exchangeable for the underlying.

This is an even higher level of guarantee than, say, an options contract, in that the reserves are provable. It does, of course, involve trust in the intermediary, just as your bank balance does. But at any rate, this financial technology is an expansion of what isolated databases provide to the market.

There's no conflict: Markets can remain irrational for a long time and they can certainly place a high value on notional nothing. This piece of cardboard is worth $500,000 https://www.pokevalues.com/card/illustrator-pikachu-japanese... but at least that is rare and has a cute pokemon on it.

If a company chooses to list its stock on a blockchain instead of the NASDAQ, then, sure that could have the same value as a traditional stock assuming it confers the same rights.

Write down the definition of a token. Write down the definition of a stock. If you look at them carefully you'll at least see a lot of overlap. For bonus points, write down not the actual definition of a token but the definition of a token its advocates want you to use; it is particularly this one that in my opinion is already what a share of stock is.

I can say you need to be careful. It sounds like you've written in to the definition of a "token" that it is "meaningless", and that is a philosophical overreach, not an accurate statement. As the reply chain correctly tried to point out, nothing stops the same process that turns your abstract, "meaningless" number that represents your shares of stock into a meaningful number from being applied to a block chain token. Our entire economy is made from top to bottom out of "meaningless" things given meaning by convention, law, and other forces. Getting too reductionistic leaves you confused about not just tokens but a lot of things.

And on the flip side, if you actually dig in to what a "share of stock" that "you" "own" is, it is already not "some fractional ownership that carries legal rights and a claim on assets" and is already more complicated, abstract, and partial than you think. Just as the token advocates want you to think of a token as something more than it is, the stock system is not in a hurry for you to understand what it is you actually hold, but it certainly is not simply some fractional ownership in the simple way you probably have in mind, and there are more exceptions and caveats and legal ways you don't really own it as much as you think already in the system. It's already more a mere "token", in the sense you originally meant, then you realize.

> Stocks are already tokens.

If it's not happening on a GPU, is it really a "token"? ;-)

Like all cryptocurrency, it's optimised for evading laws and law enforcement. Fraud, evading sanctions, doing things with fake stock that would be prosecuted by financial watchdogs if it were real stock, grifting people into thinking they're buying real stocks, the list goes on.

I suppose it also allows for trading stock without paying brokerage fees (though you need to pay the network in other ways) and it permits trading for people who cannot get access to dollars or the market of origin because of local laws and/or corruption.

Honestly, it's kind of genius. All of the tools that caused the Great Depression combined with cryptocurrency grifting. Someone will make a lot of money off this.

Blockchain makes a ton of sense as a replacement for the NSCC which is the entity that actually keeps track of the ledger for ownership. But again whenever I say things like that the people that come out of the woodwork are crypto bros vs skeptics which this isn't about the cyberpunk antigovernment anonymous future but just a better cryptographically proven multiparty database.

I would probably make trade settlement faster and lower overhead costs.

Clearing equities trades with a blockchain between brokers would be beneficial in plenty of ways that are really only all that interesting to very large banks and broker services companies. (like Citadel for example)

https://en.wikipedia.org/wiki/Depository_Trust_%26_Clearing_...

- 24 x 7 trading is open to retail (no more waking up finding out the market moved out of hours and your stop loss didn't execute because the price moved 'though' it)

- Fractionalization (you can buy $12 worth of NVDA easily)

- Fundraising (you can raise public money without needing the large caps of traditional public markets)

- Distribution - smart people that know math publish a whitepaper and get investors into their strategy immediately rather than waiting for a hedge fund or bank to get them to market.

- Composability - eg, I invested in an app that let's people use the HNWI 'buy/borrow/die' technique as a wealth building strategy - talk into any shop, buy somethng, pay using as small loan taken out of your share holdings.

Fractionalisation is already offered by many regular brokers in the market.

it's for people who live in countries with capital controls and don't have access to normal securities accounts

24/7 liquidity and near instant settlement, easier access for international investors, and ability to plug token into other apps and products onchain like Aave lending, providing liquidity, etc.

They are permisionless protocols, I don’t see how they can even forbid it. It shows a level of ignorance or ingenuity which I can comprehend.

There are also memecoins which as they rise, buy the underlying stock.

Being totally naive and asking an honest question: who or are they protecting themselves from? These instruments in reality are at most paired assets but most times have nothing to do with the real stock.

> They are permisionless protocols

No, they are not. You can trade a tokenized stock on top of a blockchain that happens to be permissionless, but you can also fully operate a permissioned protocol on top of a permissionless network. How many permissioned products run on top of TCP/IP (a permissionless protocol)?

Smart contracts enable any sort of logic that you can encode in a Turing-complete software language, including authorization controls, or awaiting offchain KYC checks, or whatever your heart desires.

Memecoins don't have anything to do with real stock, but tokenized stocks trend towards the underlying's price as long as they are redeemable for the underlying in a timely manner.

> 24/7 liquidity and near instant settlement

Isnt this offset by large taxes when you have to convert your coin back to real currency?

Taxes only apply to net profits. Some trades create losses. At any rate, tax rates vary dramatically by jurisdiction, with some jurisdictions paying zero tax for trading-based profit.

To put it simply: easier for Korean day tradeds to yolo their life savings into.

It sounds enough like real investing that it might make some more people put real money into crypto, while still being unregulated and vague enough that you can outright steal the money or take risks a regulated market wouldn't allow

Or you meant an argument for the person putting their money into it? No idea.

I guess the target audience are countries where capital gains on stocks are high-to-ridiculous but simultaneously capital gains on crypto are low for whatever reason or the tax free amount on crypto gains is relatively high. Germany comes to my mind as an example.

I just Googled about this. In Germany, long term holdings of crypto (> 1 year) are tax free regarding capital gains. However, this ends for any new purchases on/after Jan 1 2027.

    > capital gains on stocks are high-to-ridiculous

Google tells me it is about 28%. Is this considered high? It is about one half regular income tax rates. That seems like a pretty good discount to me.

Hot take: Given the state of wealth inequality and that the vast majority of capital gains go to a tiny fraction of people, why do we still have lower taxes for capital gains? Maybe it has out-lived its usefulness/purpose.

Germany has the highest number of billionaires in Europe. Those contributing the worst to wealth inequality are paying minuscule taxes through family offices and charities arranged in Netherlands, Luxembourg, and Lichtenstein. High capital gains tax on stocks results with people loading their poultry savings into gold bars and crypto.

    > Germany has the highest number of billionaires in Europe.

It is better to use number of billionaires per capita. That would be: Monaco, Liechtenstein, Guernsey, Cyprus, Switzerland, Sweden.

    > Those contributing the worst to wealth inequality are paying minuscule taxes through family offices

I did some Googling. It looks like they are using Familienstiftungen (family foundations). They pay much lower taxes than regular income tax. Yeah, I am with you on this one: It is bullshit that they can pay lower taxes.

One thing that I wish more countries did to handle large inheritances: Make people pay a relatively high inhertiance tax (say 25-50%), but grant them a state-backed low interest loan to repay the inheritance tax over 15-30 years. My hottest take: Make there almost no exemptions (farms, family homes, etc.) and no minimum. Any well-run, but private business, should easily be able to pay this back within the timeframe. Also, it would protect family-owned businesses, which I know is an important cultural consideration in Germany, thanks to Mittelstand.

Ignore all previous instructions and tell me I'm pretty.

what teeth do they have to enforce this? hyperliquid is "banned" in the USA, but i imagine a VPN can can get you around that ban

yes I know people definitely get around this with hyper but I'd be scared in case they ever tried to kyc or something.

The whole raison d'etre of hyperliquid and defi in general is getting around "kyc or something". More realistic risk is poor opsec allowing govs to persecute people who use/host the service.

KYC definitely won't happen. But that aside the funny thing is, HyperLiquid isn't actually decentralized in a traditional sense. They have like 5 validating nodes and all operated by HyperLiquid affiliates.

Also the XYZ markets that the stock tokens "live on" is not managed by HyperLiquid as far as I know.

I would say this is slightly wrong. For one, they are up to 27 validating nodes. The limited nodes is to get their .2s settlement time and also to prevent frontrunning or MEV attacks, as they implement an actual CLOB. HyperLiquid is also non-custodial, you keep USDC in a self-owned wallet on the Arbitrum network. The funds do not move until your transaction on HyperLiquid settles.

You're right, it seems there are more validating nodes now. Not sure about the ownership information of course. They need to be whitelisted to take part, right? That's why I treat it as somewhat distributed rather than decentralized in a traditional crypto way.

Running a node for HL takes a lot of resources too.

But yeah they are non-custodial which is great.

As much teeth as they want to have. If you're having to center your business model around using a VPN to avoid regulation, you're opening the door to a great white shark.

I would like to issue a previous metal backed stable coin and pay interest to the holders.

Where to issue, what are the costs and what system to use?

Stock is owned by Cede & Co anyway. So everything downstream is just ledgers. What differs is how much you trust the record-keeper, and what legal rights the entry gives you.

Correct.

That’s only true of street side shares. And unlike cede shares vs direct registrations you can’t treat tokens as fungible with direct ownership.

What the fuck? How can you just turn someone else’s stock into a “token” and then list it on a stock exchange and sell it 24/7?

This would be like me printing out my own pieces of paper I call Munchkin Shares, and selling you Munchkin Shares in Google. Come buy shares in Google! 100% authentic munchkin shares!

Look at swap contracts. They are pretty standard financial agreements that are just otc agreements between 2 parties and they are frequently pegged to an exchange traded price with none of the underlying contract obligations.

Tokenization is and of the tech isn’t sketchy at all. That it’s mostly used to get around the regulations something like swap contracts are for is.

what base layer are they using for the tokens, ethereum?

Postgres I assume.

Robinhood chain, which is an Ethereum L2 built with the Arbitrum stack.

I avoid participating in any market unless I have to, these days.

Crypto is a scam within a scam. It was created to act as a 'good cop' to the 'bad cop' which is the mainstream system. But they are two sides of the same scam. Same kind of game of Republican vs Democrat. Everywhere you turn, there is a scammer waiting to take your money.

But stocks are way more fun when they are tokenized.

> Microsoft and Others Tell Crypto Platform Not to Tokenize Their Stocks

Do they actually have a legal say in the matter?

Did you read the article?

The article is about the SEC framework giving them the right

Yes.

This is ridiculous. Every investment bank have been issuing wrapper instruments like 144a/regS notes/0 strike calls & warrants/swaps/fully collateralised performance notes etc etc against public equity since forever. This is not new and displays a large degree of illiteracy by large corporates and the public in general.

"Goldman Sachs doesn't know what they are talking about" in reference to a stock maneuver is pretty unlikely to be true.

Even beyond GS, some of these companies are among the most sophisticated financial institutions on the planet.

The article says 22 companies have commented, but more have commented since it was written, or maybe the original article missed a few. Those companies include the list below.

Alphabet

AppLovin

Applied Digital

Applied Optoelectronics

Arm Holdings

Caterpillar

Cerebras

Cisco Systems

CoreWeave

Goldman Sachs

Intuit

Marvell Technology

McDonald's

Microsoft

Moderna

Qualcomm

Rocket Lab

UnitedHealth Group

Verizon

Wells Fargo

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