Yesterday, Robinhood introduced “Stock Tokens” a new blockchain-based tokenization technology and this might just be a game changer for the future of Investing.
I did some digging and found out some cool stuff:
What is a stock token?
A private stock token is a digital asset that provides fractional exposure to the equity shares of a privately held company—before it goes public like OpenAI, SpaceX etc along with 200 other US listed companies like NVIDIA, Apple etc
But how does it work?
One might wonder how it is possible, as no shares are issued to public. Well, these tokens (are similar to lots) that we buy in F&O with the underlying being actual equity in the private company held by custodians (Institutions that hold equity)
In simple terms, It is like holding fractional shares of unlisted companies with risks associated similar to a derivative product.
While stocks are created to your demat account, Stock tokens will be credited to your crypto wallet.
What are the risks involved?
The biggest risk lies in the lack of regulatory clarity around ownership, which can result in low liquidity and sharp valuation swings—common in unlisted markets. A recent example is HDB Financial Services. You might buy at price X in the unlisted space, only to see the stock list 50% lower when it hits the public market.
One more risk that is associated with blockchain technology and digital assets is hacking, which needs to be factored into.
@nithin - Eager to know your thoughts on this latest development. How do you see this playing out in the Indian market context? Can Indians also buy US equity using tokens in the coming days if regulators approve?
