Both VALR and Luno have launched tokenised stocks in SA, allowing South Africans to purchase exposure to US equities like Tesla and Nvidia without having to use their foreign allowance. It’s part of an accelerating trend where cryptocurrencies are gatecrashing the traditional finance space, explains VALR’s Gianluca Sacco. From Moneyweb.
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Tokenised shares, known as xStocks, have arrived in South Africa. Both VALR and Luno have made it possible to buy shares like Tesla, Nvidia and Robinhood – paying in rands – without using your overseas allowance. You can buy a fraction of a share and, amazingly, you can even transfer your shares to a friend as a gift or use them to pay for your groceries.
In this week’s Moneyweb Crypto podcast, VALR chief operating officer Gianluca Sacco explains how this changes the investment landscape in SA.
xStocks are cryptocurrencies that track the price movements of traditional US equities. They’re issued on the Solana blockchain by a company called Backed Finance, which manages all the necessary requirements to offer a cryptocurrency that’s able to track the price of an underlying US equity.
“It’s important to note that these crypto assets are not securities,” says Sacco. “They are tokenised representations of US equities. An important thing to understand is that buying an xStock does not provide you with ownership of the underlying asset. It provides you with ownership of a cryptocurrency that tracks the price of the underlying equity instrument.”
VALR has launched an initial batch of five tokenised stocks, with more to follow in the coming weeks, while Luno has launched 40. They can be traded 24/7 at costs similar to those paid by JSE investors.
This is part of an accelerating trend where cryptocurrencies are gatecrashing the traditional finance space with products that are recorded on the blockchain, with all the perks that come with that – fractional ownership, 24/7 trading, dividends that are reinvested in the underlying share rather than paid out as cash, and the ability to transfer ownership in minutes rather than days (as is the case with ordinary stock exchange-listed equities).
“You can trade xStocks anytime that you’d like. These are not beholden to market hours. You’re not limited to having to wait for markets to open to be able to change your positioning, buy a particular asset, or sell an xStock if you wish. The pricing of these assets is also very transparent. You can see, on our exchange, the price at which you can buy and sell, so that is always completely transparent and open and visible,” adds Sacco.
You can also pay in rands, bitcoin or US dollar stablecoins and you get 1:1 exposure to these US equities.
“For the vast majority of people who may struggle to get access to US equities in traditional markets, this is a really nice alternative for them. And for them, it may not be the first and most important priority to have true ownership of the underlying stock.
“Now, we have to be very clear about the fact that there are risks when you aren’t a direct investor into the underlying equity instrument, because you have counterparty risk, most importantly. That’s the issuer of these instruments, which is not VALR, it’s backed [finance], actually does invest into the required instruments to be able to give you correct pricing of these assets.
“But I think there are definitely people who prefer the speed, the amount of access available to them and the cost of being able to invest in these assets rather than investing directly into the underlying [equity instrument].
“If I speak for myself, I’m used to using crypto exchanges. I’m not quite so used to trading on traditional markets. And so for me, it’s almost like a reflex. It’s really easy for me to go and invest in the assets I want, on an advanced exchange like VALR as opposed to creating a brokerage account with a business somewhere else.”
VALR also recently launched a USD Private Credit Token (USDPC) – a yield-bearing crypto asset offering between 8% and 10% a year in USD, offering South Africans a way to hedge against potential volatility in the rand.
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