Binance Lets Traders Post Tokenized Stocks as Collateral

Binance opened bStocks collateral to all its margin accounts on September 21, lifting the restriction that reserved it for VIP 3 clients and above. The range exceeded 30 billion dollars in cumulative volume in less than 90 days. However, the announcement adds a questionnaire and automatic restrictions for ordinary accounts.

Collateral open to all margin accounts

Binance published on September 21 an extension of its margin rules. The bStocks, its range of tokenized securities backed by stocks and American ETFs, now serve as collateral on all cross margin and portfolio margin accounts. 

The feature was reserved for VIP 3 and above accounts. The extension impacts a still young tokenized stock market, where two platforms account for the bulk of the volume.

Leverage can reach 5× to buy bStocks with borrowed assets, under valuation discounts and collateral ratios. A deposited security can also cover a short futures position. 

For Shunyet Jan, head of the exchange and trading at Binance, the user no longer has to treat tokenized stocks and crypto positions as two separate portfolios.

Certificates, not stocks, and a filter for small accounts

The opening is not unconditional. Ordinary accounts and VIP 1 and 2 must complete a suitability questionnaire before using bStocks as collateral, specifies the official Binance announcement.

Beyond certain risk thresholds, the platform can limit incoming bStocks transfers, restrict the purchase of illiquid assets, block any new futures position in portfolio margin, and suspend auto top-up. These measures are lifted as soon as the account falls back below the threshold. VIP 3 and above are exempt.

The product qualification deserves attention. The issuer specifies that bStocks are certificates representing certain financial instruments, not stocks: the holder does not own the underlying stock. The product is offered in the ADGM, outside the United States.

A market 33 times more active, but very concentrated

The monthly volume of tokenized stocks rose from 237 million dollars in January to 7.9 billion in August, according to Binance Research. The active capitalization reached about 4 billion dollars on September 9, up 314% since January. The comparison is therefore based on a still narrow base.

Turnover followed, from 0.23 times the average active capitalization in January to 2.14 times in August, after a peak of 3.32 times in July. Two platforms concentrate the activity: bStocks and Robinhood accounted for 87.8% of the volume of tracked issuers in September, compared to 0.8% in June. This concentration is the main weak point, as the SEC’s experimental framework does not cover a product issued in the ADGM.

The next test is in one number: the share of bStocks and Robinhood in October’s volume. Above 85%, the opening will have mainly expanded the base of two platforms. If it falls, the market will have gained depth. The dynamics of tokenized assets on the BNB Chain will remain the indicator to watch.