Are Security Tokens now called Stock Tokens and are they like like an ADR on a legacy exchange?

admin 19 April 2021 Technology & Digitalization 0

Nerdy headlines like that will get me a stern lecture from our CMO about the need to generate more page views from clickbait.

In what seems like an eon ago (on 3rd March 2021), I wrote in 4-parter on Coinbase “IPO” – Part 1 = 5 Reasons Why It Matters

“The Coinbase “IPO” (actually a Direct Listing) is where the three worlds collide:

Silicon Valley VC – the old Wild West

Cryptoworld – the new Wild West

Wall Street – the old Regulated East”

Now we see this happening in the news that Binance Will Open Trading for Coinbase Stock Token (COIN)

A Coinbase Stock Token on Binance sounds like an ADR, which will not make it easy for the PR from legacy exchanges who sell ADRs to trash talk Stock Tokens.

American Depositary Receipt (ADR) were introduced in the 1920s. If you want details go to this Investopedia article where you will find this quote:

“An American depositary receipt (ADR) is a negotiable certificate issued by a U.S. depositary bank representing a specified number of shares—often one share—of a foreign company’s stock.”

TLDR: an ADR is a Token.

Someday all trading will be 24/7 and we will have real time settlement. It is quaint in the digital world that legacy exchanges work M-F during “business hours” and settlement is days after trading. What we do NOT know is if such 24/7 real time settlement exchanges will be:

a traditional regulated exchange that “goes crypto”?

a centralized crypto exchange such as Binance or Coinbase?

a new decentralized crypto exchange?

Do we now have to change all our Security Token tags to Stock Token tags?

A reality check is that markets prize liquidity over efficiency. 24/7 trading and real time settlement are an efficiency improvement, but sellers go where there are buyers and vice versa. That priority trumps efficiency. That is why Coinbase listed on a traditional exchange rather than “going crypto”.

Binance and Coinbase are competitors. Binance is not expecting to trade a lot of COIN but they do expect to damage the Coinbase brand among crypto true believers.

Binance needs something like the Microsoft IPO, when Microsoft chose NASDAQ over NYSE in 1986 this was a major achievement for NASDAQ, which was only a quotation system, not an exchange. Now it’s an exchange. Binance offering stock tokens for famous brands such as Tesla and Coinbase is a good start, but only a start not a breakthrough.

If you like your equity traded on traditional regulated exchanges, check out the Fintech 50 Index which since 14 April has included Coinbase (COIN).

Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.

Binance coinbase real time settlement security token Stock Token WealthTech

Are Security Tokens now called Stock Tokens and are they like like an ADR on a legacy exchange?