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The Rise of Stock Tokens: A New Round of Innovation Competition Among Fintech Giants
Stock Token: A New Wave of Financial Innovation
Recently, several well-known fintech companies and cryptocurrency exchanges have launched stock token services, attracting widespread attention in the market. This innovative product provides investors with a brand new way to trade stocks, which is worth our in-depth discussion.
Innovation of Stock Tokens of Certain US Listed Companies
A well-known American fintech company recently launched a highly anticipated stock token service in the EU market. This innovation allows users to buy and sell derivatives tracking stock prices priced in USD, with the company automatically handling EUR conversions and charging a 0.1% exchange fee.
Core Mechanism
Custody and Mapping: These tokens are derivatives that track prices, with the underlying assets being custodied in the company's European accounts by a U.S.-licensed institution. The company is responsible for issuing these contracts and recording them on the blockchain. Due to the derivative nature of stock tokens, the corresponding securities can only be custodied in the company's accounts, and users cannot directly redeem them.
Regulatory Compliance: The company's stock tokens are offered as derivative contracts under the MiFID II (Markets in Financial Instruments Directive II) framework. The exchange previously acquired by the company holds an MFT (Multilateral Trading Facility) license, complying with the EU's licensing requirements for companies providing derivative trading services. Currently, this service is only available in the EU and is not tradable in the United States.
Trading Hours and Corporate Actions: In the first phase, stock tokens are available for trading five days a week, from Monday 02:00 to Saturday 02:00 Central European Time/Summer Time. For corporate actions (such as dividends, stock splits, etc.), the company will execute on behalf of the investors, including position adjustments, cash distributions, dividend processing, and so on.
Blockchain Technology Application: The company issues stock tokens using blockchain technology, initially based on a certain Layer 2 blockchain, and plans to migrate to its own Layer 2 blockchain in the future.
Expansion of the Private Equity Market: As part of the cryptocurrency promotion plan, the company has for the first time enabled access to private equity through blockchain technology, launching tokenized stocks of two well-known technology companies to European users. This initiative benefits from the relatively flexible regulatory environment in the European Union, allowing ordinary investors to access equity in unlisted companies that is typically reserved for insiders and high-net-worth investors.
Open Design of a Cryptocurrency Exchange
Another well-known cryptocurrency exchange has launched a stock Token product that adopts a more open design concept, which is closer to the native ecology of cryptocurrencies.
Core Features
Custody and Mapping Mechanism: Stock tokens are purchased and custodied by partners responsible for real stocks or ETF assets, stored in compliant third-party custodians. Each token is 1:1 pegged to the underlying asset, with custody processes strictly regulated to ensure asset safety and transparency. Tokens are based on a high-performance blockchain and represent partial ownership of the underlying stocks or ETFs.
Regulatory Compliance: The exchange actively collaborates with global regulatory authorities to ensure that stock tokens comply with local laws and regulations. Currently, this service is only available to non-U.S. customers and does not support users from markets such as the U.S., Canada, the U.K., the European Union, and Australia.
Trading Hours and Corporate Actions: Supports 24/5 trading (all day from Monday to Friday), breaking through the time constraints of the traditional US stock market. Dividends are indirectly distributed through a token price adjustment mechanism, and other corporate actions are handled by partners.
Blockchain Applications: Stock tokens are currently based on a high-performance blockchain, with plans to expand to other high-performance blockchains in the future to enhance interoperability and market coverage.
Issuance situation: The first batch includes 60 US stocks and ETFs, including several well-known technology companies and ETF products.
Comparison of Two Modes
The first company's model performs better in terms of compliance and coverage of mainstream populations, and it offers unlisted stocks; while the second company covers more regions and supports native on-chain trading of cryptocurrencies and decentralized financial protocols, making it closer to the cryptocurrency ecosystem.
For entrepreneurial teams, participating in the issuance of new stock token assets may face competition from these two large companies. Currently, there are two potential opportunities:
Segmentation of target groups or regional coverage: Target regions and groups that traditional brokers find difficult to reach, but which cryptocurrencies can cover.
Financial Product Innovation: After stock tokens are included in the asset pool, the startup team can offer new derivative assets and trading strategies, such as high-leverage contracts and leveraged ETFs, to create differentiated competition with large exchanges.
The emergence of stock tokens marks a new stage in the integration of traditional finance and blockchain technology, providing investors with more diversified choices. However, as a new type of financial product, investors still need to fully understand its mechanisms, risks, and relevant regulatory provisions when participating.