Binance Deepens Play for Tokenized US Stocks With Alpaca Investment

Key Insights

• Binance has a minority stake in Alpaca, a major player in tokenized US stocks and ETFs.
• The exchange also has a revenue-sharing agreement with the firm
• This signals Binance’s push into real-world asset tokenization as it aims to become a financial super app.

Binance has disclosed that it owns a minority stake in Alpaca, a U.S.-based fintech infrastructure company that powers tokenized stock trading. The disclosure appeared in recently published legal documents tied to Binance’s new securities trading products.

The investment comes shortly after Binance launched its bStocks platform, which allows users to trade tokenized U.S. stocks and exchange-traded funds using stablecoins. While the exchange did not reveal the size of its investment, the disclosure offers a clearer picture of Binance’s long-term strategy around real-world asset tokenization.

According to industry reports, Alpaca currently controls a dominant share of the tokenized U.S. equities market and provides the infrastructure that enables tokenized stock trading across multiple platforms.

Binance Partnership With Alpaca Includes Revenue Sharing

The disclosure comes a few days after Binance launched tokenized stocks trading, bStocks, on Monday. According to the exchange, users will be able to trade over 7,000 US stocks and ETFs on its platform and buy fractional shares with stablecoins.

Binance partnered with Alpaca to bring tokenized stock equities to its platform. The exchange has now stated that it chose the firm because it is the appropriate clearing broker to enable securities trading on the crypto exchange.

“Binance’s selection of Alpaca was made on the basis of execution quality, regulatory standing, and access to US market liquidity,” it said.

The document disclosing Binance’s stake. Source: Binance

Interestingly, the document titled “Securities Trading Product Terms” also disclosed terms of the partnership between Binance and Alpaca. A key term is the revenue-sharing arrangement between the two companies.

Binance is expected to receive a share of the revenue Alpaca generates through the exchange. These include 50% of remuneration for payment for order flow (PFOF) and 65% of the excess revenue Alpaca generates from fully paid securities lending.

However, the exchange clarified revenue sharing arrangement did not impact the partnership and will not affect users. It stated that Alpaca is independent and subject to US laws, which prohibit it from using PFOF considerations to route orders against best practices.

Binance Makes Major Push Into RWA Tokenization

Meanwhile, the disclosure further reveals the scope of Binance’s ambitions with real-world asset (RWA) tokenization. It already has the majority of market share across all crypto exchanges for spot and derivatives trading.

It now appears focused on expanding into traditional markets as it seeks to become a multi-asset platform. A blog post from Alpaca announcing its partnership with the exchange had stated that Binance’s main goal is to become a “multi-asset, multi-jurisdiction financial super-app.”

Offering access to US equities seems like a step in that direction, especially given the exchange’s claim of over 300 million global users. Before its bStocks, the exchange launched TradFi perps contracts in January, and trading volume reached $60.8 billion by the third week of May.

Given the size of the US stock and ETF market and investor interest, Binance hopes to capitalize on its massive user base.

Interestingly, as Binance ventures into RWA, it is shifting away from other products. The exchange decently announced that it will shut down its centralized non-fungible token (NFT) service on July 3.

Users have been advised to move their NFTs to their Binance wallet or compatible third-party wallets to avoid losing access.

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