this won't really matter much because even if tokenization of stocks is banned you can just create perpetual futures that settle on the price of the real stock. so if you are a crypto only investor (due to your country preventing open capital markets or other restrictions) you will put your money there and then some intermediaries with access to both tradfi markets with actual stock and access to the crypto perpetual futures markets will provide the liquidity and keep prices in sync.
The whole raison d'etre of hyperliquid and defi in general is getting around "kyc or something". More realistic risk is poor opsec allowing govs to persecute people who use/host the service.
KYC definitely won't happen. But that aside the funny thing is, HyperLiquid isn't actually decentralized in a traditional sense. They have like 5 validating nodes and all operated by HyperLiquid affiliates.
Also the XYZ markets that the stock tokens "live on" is not managed by HyperLiquid as far as I know.
As much teeth as they want to have. If you're having to center your business model around using a VPN to avoid regulation, you're opening the door to a great white shark.
So that people with off the books defi assets can diversify their holdings as if they bought into the non-defi world, without any of those pesky taxes or KYC requirements.
My understanding is that it's possible there will be / is a country that you don't have low cost or easy access to US stocks, but can have access to tokenized stocks. If Coinbase and others are smart, they'll collect the KYC info the US requires, regardless of where the person is in the world. In fact, that seems like the other part of this line in the article: "provided the tokens carry the same rights and privileges as the underlying shares, including dividends and voting rights."
Like all cryptocurrency, it's optimised for evading laws and law enforcement. Fraud, evading sanctions, doing things with fake stock that would be prosecuted by financial watchdogs if it were real stock, grifting people into thinking they're buying real stocks, the list goes on.
I suppose it also allows for trading stock without paying brokerage fees (though you need to pay the network in other ways) and it permits trading for people who cannot get access to dollars or the market of origin because of local laws and/or corruption.
Honestly, it's kind of genius. All of the tools that caused the Great Depression combined with cryptocurrency grifting. Someone will make a lot of money off this.
Stocks are already tokens. "Tokenizing" stocks makes no sense, if one assumes quite reasonably that "tokenization" involves giving token-ness to something that was not already a token. What it is is wrapping what is already a token in another token, mostly so the second token can get around the limitations of the first. But some of those limitations are incidental and can be eliminated at any time by the underlying token provider, mostly because nothing stops a conventional stock market from being tradeable 24/7. They already are if you're in the club anyhow, per all the "aftermarket" and "pre-market" trading you hear about around quarterly release times.
The rest of the limitations are regulatory, and if the wrapping token can get access to regulatory approval to do their thing, so can the stocks.
The whole thing feels skeevy as all get out to me. It feels like someone telling me that they'll be happy to hold my mortgage between me and the current holder. There is no good reason for that. Frankly there is already a disturbing amount of indirection in the way you don't actually own the stocks you think you do, but they're held on behalf of you on behalf of your broker at the Depository Trust & Clearing Corporation. Adding another layer of indirection makes me worry about the motives of the people who are very excited about being that layer.
It's a growth play for financial services to find trading volume they otherwise cannot create. Young retail has no cashflow to speak of, so Coinbase and Robinhood target them for the house rake of trading meme stocks and crypto. The rest is institutional, broker dealer, traditional retail brokerages, etc but there's only so much revenue to be had moving existing securities around amongst those who can obtain exposure to them, managing pensions and 401ks, etc. ~93% of equities are held by the top ~10% of US households, for example.
Lots of cost inefficiency to squeeze out, but everyone is incentivized to not cannibalize other participants or their own business. "Its a big club and you're not in it" and "If you're playing a poker game and you look around the table and and can't tell who the sucker is, it's you."
If I recall, the most optimal equities market operating model is a short auction window at the open and the close to process order books, but again, no appetite for efficiency over revenue, I'll have to find the paper.
Most ideal equities markets operating model would be a short auction period at the open and the close
This is almost exactly aligned with real life trading experience with retail traders. Retail trader P&L map by weekday and time of day shows that the overwhelming majority of retail losses fall into one of two categories - either choppy hours during the day where liquidity is low (noise from overtrading) or 15 minutes after the NY open where the volatility spike happens and stop hunts take place.
Extending equities to 24/7 with tokenization only increases the amount of low liquidity chop, which is good for exchange fees, but not for retail expectancy.
This is ridiculous. Every investment bank have been issuing wrapper instruments like 144a/regS notes/0 strike calls & warrants/swaps/fully collateralised performance notes etc etc against public equity since forever. This is not new and displays a large degree of illiteracy by large corporates and the public in general.
Stock is owned by Cede & Co anyway. So everything downstream is just ledgers. What differs is how much you trust the record-keeper, and what legal rights the entry gives you.
Also the XYZ markets that the stock tokens "live on" is not managed by HyperLiquid as far as I know.
I suppose it also allows for trading stock without paying brokerage fees (though you need to pay the network in other ways) and it permits trading for people who cannot get access to dollars or the market of origin because of local laws and/or corruption.
Honestly, it's kind of genius. All of the tools that caused the Great Depression combined with cryptocurrency grifting. Someone will make a lot of money off this.
The rest of the limitations are regulatory, and if the wrapping token can get access to regulatory approval to do their thing, so can the stocks.
The whole thing feels skeevy as all get out to me. It feels like someone telling me that they'll be happy to hold my mortgage between me and the current holder. There is no good reason for that. Frankly there is already a disturbing amount of indirection in the way you don't actually own the stocks you think you do, but they're held on behalf of you on behalf of your broker at the Depository Trust & Clearing Corporation. Adding another layer of indirection makes me worry about the motives of the people who are very excited about being that layer.
Lots of cost inefficiency to squeeze out, but everyone is incentivized to not cannibalize other participants or their own business. "Its a big club and you're not in it" and "If you're playing a poker game and you look around the table and and can't tell who the sucker is, it's you."
If I recall, the most optimal equities market operating model is a short auction window at the open and the close to process order books, but again, no appetite for efficiency over revenue, I'll have to find the paper.
(thoughts and opinions always my own)
This is almost exactly aligned with real life trading experience with retail traders. Retail trader P&L map by weekday and time of day shows that the overwhelming majority of retail losses fall into one of two categories - either choppy hours during the day where liquidity is low (noise from overtrading) or 15 minutes after the NY open where the volatility spike happens and stop hunts take place.
Extending equities to 24/7 with tokenization only increases the amount of low liquidity chop, which is good for exchange fees, but not for retail expectancy.
Do they actually have a legal say in the matter?