The Estonia-based exchange will enable investors outside of the US to trade in stocks of firms like Apple, Facebook, and Tesla.

2018 was a year when crypto investors realized the risks involved with investing in utility tokens. This year may see a trend towards security tokens because they provide a certain comfort level to investors by being regulated under the same laws that govern securities.

DX.Exchange, a company with offices in Estonia and Israel, is launching a digital platform that will allow users to invest in stocks of major US firms like Apple, Facebook, and Tesla. Users outside of the US will be able to trade these securities even when the stock markets are closed.

Have you been waiting for https://t.co/gavrewTi9F Digital Tokenized Stocks ? Well wait no more and make sure to watch the video below to get the full breakdown! #exchangeyourway pic.twitter.com/gMK4CVZQdE — DX.Exchange (@DXdotExchange) January 6, 2019

According to Bloomberg, the new platform will offer security tokens backed by the stocks of 10 Nasdaq-listed companies including Tesla, Facebook, Apple, Google, and Intel.

In future, DX plans to take its offering to the New York Stock Exchange and to cities like Tokyo and Hong Kong. The digital tokens are backed by regular shares and holders will be entitled to cash dividends.

A New and Untested Market

With its offerings, DX will act as a bridge between traditional financial markets and the new age cryptocurrencies. The initial launch will help the firm gauge the market appetite for such products.

The tokens will be backed by actual shares bought and held by partner firm MPS MarketPlace Securities Ltd and will be issued using the Ethereum blockchain.

Tokenizing mainstream stocks or assets brings the advantage of fractional ownership – investors can choose to buy parts of a share. Another benefit for traders is that security tokens can be bought and sold even when stock markets are closed.

Investors across different countries can now get access to US stocks that would otherwise be inaccessible.

Is the Exchange Regulated?

DX is reportedly licensed by the Estonian Financial Intelligence Unit and has full authorization to operate in the European Union. As far as the United States is concerned, DX CEO Daniel Skowronski believes that the exchange doesn’t need permission from US regulators as it does not operate there. The US Securities and Exchange Commission (SEC) declined to comment as of press time.

According to Skowronski, DX’s offering is compliant with Europe’s Mifid II directive. In an email sent to Bloomberg, he stated:

We saw a huge market opportunity in tokenizing existing securities. We believe that this is the beginning of the traditional market’s merge with blockchain technology. This is going to open a whole new world of trading securities old and new alike.

Many security token exchanges are preparing for launch across the US and other jurisdictions. Whether tokenized financial assets will find favor with the investors remains to be seen as the cryptocurrency market has still not recovered from the prolonged bear market.

What are your thoughts on the movement toward security tokens? Sound off in the comments below.

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