What Are Stock Tokens? How to Invest in Tesla and TSMC via Crypto and Trade Them on WEEX

If you have heard that you can buy tokens linked to the stock prices of companies like Tesla or TSMC on a cryptocurrency exchange, you are likely curious about how it works.

Stock tokens (tokenized stocks) are digital tokens issued with actual stocks as underlying assets. While their prices move in correlation with the stock price, they do not include shareholder rights such as voting rights or dividends. In other words, they are not "the stocks themselves" but rather "tokens that can be traded in correlation with stock prices." Note that some tokens issued by Ondo Finance are designed so that dividend equivalents are automatically reinvested and reflected in the token price.

This article provides an easy-to-understand explanation of how stock tokens work, their benefits and risks, and the assets you can trade on WEEX.

What Are Stock Tokens?

Stock tokens are digital tokens issued on a blockchain that are pegged 1:1 to actual stocks.

The mechanism is simple. Specialized issuers (such as Backed and Ondo, mentioned later) hold actual stocks in custody with regulated financial institutions and issue an equal number of tokens on the blockchain as backing. The structure is such that if one share of Tesla stock is held, one TSLAX is issued.

Because the token price moves in correlation with the underlying asset's stock price, the stock token rises when the Tesla stock rises and falls when it falls.

Differences from Traditional Stock Investing

Types of Stock Tokens Available on WEEX

You can trade stock tokens from two issuers on WEEX. While both are "1:1 real-stock-backed" types, the issuers and target assets differ.

① xStock (Issued by Backed Finance): 〇〇X Series

These are tokenized stocks issued by the Swiss-regulated financial institution Backed Finance. They are issued on both the ERC-20 (Ethereum) and Solana SPL chains, and the actual Tesla shares are held by a regulated custodian.

Representative Assets: TSLAX (Tesla), etc.

② Ondo Global Markets (Issued by Ondo Finance): 〇〇ON Series

These are tokenized stocks and ETFs provided by the US-based DeFi project Ondo Finance. They are backed by real stocks and feature the ability for non-US residents to trade 24/7. The design also incorporates benefits equivalent to dividend reinvestment.

Representative Assets: TSMON (TSMC), NFLXON (Netflix), SBUXON (Starbucks), OXYON (Occidental Petroleum), etc.

Benefits of Stock Tokens

① Access to US Stocks Without a Securities Account

Investing in US stocks from Japan involves many hurdles, such as opening a foreign stock brokerage account, currency exchange, and tax reporting. With stock tokens, if you have a WEEX account and USDT, you can trade tokens linked to the stock prices of major US companies without any additional procedures.

② 24/7 Trading and Low-Entry Participation

The US stock market is only active during the night in Japan. Since stock tokens can be traded 24/7, you can react in real-time even during the day in Japan. Furthermore, because you can purchase in fractional units, you can participate in price movements even for high-priced stocks with small amounts.

This is particularly effective for responding to major weekend news. If a global corporate announcement or geopolitical event occurs over the weekend, traditional stock investors cannot do anything until the market opens on Monday. With stock tokens, you can take a position or exit before waiting for Monday.

③ Bridging TradFi and DeFi

Because stock tokens comply with blockchain standards like ERC-20 or Solana SPL, they can be used for collateral or lending in DeFi protocols. This is at the forefront of the "RWA (Real World Asset tokenization)" trend, bringing real-world assets into DeFi.

Risks and Precautions of Stock Tokens

① No Shareholder Rights

Holding stock tokens does not grant you voting rights or the right to receive dividends. They are strictly "tokens that move in correlation with stock prices."

② Custody Risk

The value of stock tokens depends on the issuer (Backed or Ondo) properly maintaining the custody of the actual stocks. If the issuer faces financial issues, forced suspension by regulators, or problems with the custodian, the token value could be affected.

③ Regulatory Risk

Tokenized stocks are still a new financial product, and trading may be restricted based on regulatory trends in various countries. Currently, most platforms restrict purchases by US residents.

④ Liquidity Risk

Compared to general cryptocurrencies, some stock tokens may have lower liquidity. It is important to be aware that spreads may widen.

Trading Stock Tokens on WEEX

On WEEX, you can trade stock tokens in both spot and futures (Stock tab). The trading flow is the same as for regular cryptocurrency trading.

For Spot Trading:
① Prepare USDT in your spot account.

② Select the "Stock" tab on the market screen.

③ Select the asset you want to trade (TSLAX, TSMON, etc.).

④ Enter the quantity and place your order (both limit and market orders are supported).

Stock prices tend to move significantly during weekday market hours, so pay special attention to price movements during US Eastern Time market hours (night to late night in Japan time).

Conclusion

Stock tokens are a new financial product that connects TradFi and crypto, allowing you to trade tokens linked to the stock prices of major US companies 24/7 using only a crypto exchange account and USDT.

Unlike traditional stock investing, they do not include shareholder rights, but the convenience of not needing a securities account, participating with small amounts, and 24/7 trading is a major attraction for Japanese investors. On the other hand, because there are custody and regulatory risks, it is important to trade only after fully understanding the mechanism.

WEEX offers spot trading for multiple stock tokens, including TSLAX, TSMON, and NFLXON.

FAQ

Q. Can I become a shareholder by buying stock tokens?

No. Stock tokens are digital tokens that move in correlation with stock prices and do not include ownership, voting rights, or dividend rights of the actual stocks. Please understand them as "products that allow you to participate in stock price movements."

Q. What is the difference between TSLAX and TSMON?

The issuers are different. TSLAX is part of the xStock series issued by Switzerland's Backed Finance and is 1:1 correlated with Tesla stock. TSMON is a tokenized stock issued by the US-based Ondo Finance and is correlated with the stock price of Taiwan's TSMC (Taiwan Semiconductor Manufacturing Company). Both are real-stock-backed, but the project design, supported chains, and target assets differ.

Q. Can I buy or sell outside of US stock trading hours?

Yes. Stock tokens can be traded 24/7, but spreads may widen during times when the underlying US stock market is closed. If you are moving large positions, it is recommended to trade with awareness of the US market hours (night to late night in Japan time).

Disclaimer

WEEX and its affiliates provide digital asset exchange services, including derivatives and margin trading, only to eligible users in legally permitted regions. This content is for general information purposes only and is not investment advice. Always consult with a professional before trading. Cryptocurrency trading is high-risk, and you may lose all of your invested funds. By using WEEX services, you are deemed to have agreed to all relevant risks and terms of service. Please trade at your own discretion and within your means. For details, please check the Terms of Service and Risk Disclosure.