Frequently asked questions about tokenised stocks

How are stocks tokenised?

First, a regulated financial institution known as the issuer sets up the tokenised stock program. The issuer is responsible for ensuring legal compliance, creating the tokens, and guaranteeing that each token accurately represents the underlying shares.

The actual shares themselves are held by a custodian—a licensed and insured bank. This bank physically stores the shares, providing a secure and regulated layer of protection. The custodian ensures that for every token issued, there is a matching portion of a real stock held in reserve.

Investment platforms like Luno make tokenised stocks accessible to everyday investors by providing a simple interface where you can buy, sell, and manage your tokenised stock investments as easily as you would with traditional crypto assets.

What companies can I invest in?

We offer dozens of tokenised stocks for many of the world's most valuable and popular companies, such as Apple, Tesla, NVIDIA, and ETFs that track major indices like the S&P 500.

Do I own the underlying shares when I buy tokenised stocks?

When buying stock tokens, you are not buying the actual stocks; you are buying a token that represents the stock, recorded on a blockchain.

Tokenised stocks on Luno are backed by the actual underlying shares, which are held in regulated custody by Backed. The benefits of tokenised stocks include easier trading access without the restrictions of US trading hours, the ability to buy fractions of stocks, faster settlement than traditional shares, lower costs, and increased accessibility with no requirement for a brokerage account.

How is this different from traditional stock trading?

Traditional stock trading for South Africans investing in US companies typically involves opening offshore bank accounts, converting rands to dollars, incurring significant foreign exchange fees, and waiting for US market hours.

With tokenised stocks, you can buy directly with rands, trade any time of day, start with as little as R20, and get instant settlement. There's no need for you to convert foreign currency, apply for forex permissions or deal with lengthy account opening processes with international brokers.

How will dividends be paid?

Any dividends earned from your tokenised stocks are automatically reinvested into the same asset, compounding your returns and helping you grow your wealth even faster.

Can I transfer stocks to other exchanges?

For now, the tokenised stocks and ETFs purchased on Luno are only tradable and manageable within the Luno platform. They are not currently transferable on-chain to external crypto wallets or other exchanges.

Can I buy tokenised stocks with crypto?

You can currently only use your ZAR wallet to buy tokenised stocks and ETFs on Luno.

What are the costs and fees involved?

You’ll pay a 1% trade cost per transaction.

What is the minimum or maximum investment amount?

You can start investing from as little as R20. The maximum amount you can buy in a single transaction is approximately R180,000. This maximum amount is subject to change and may vary per asset.

What happens to the price of tokenised stocks on Luno when the US stock market is closed?

The price of tokenised stocks on Luno will not be stagnant when the main US stock market is closed. Because our tokenised stock trade is 24/5, their prices can continue to fluctuate.

This reflects activity in the underlying asset's pre-market, after-hours, and overnight trading sessions, as well as any other global market movements or news that impact the asset's value outside of regular US exchange hours.

How will I be taxed?

We’d suggest that you consult a licensed professional advisor for any legal, financial, or tax queries.

You can, however, download your transaction history from your wallet as a CSV file, which you can take to your relevant Tax or Financial Advisor for further assistance. Have a look at this article to find out how to download your wallet statement.

How are tokenised stocks regulated in South Africa?

Tokenised stocks are not actual equities themselves, but are crypto assets issued on a blockchain, which are backed by the underlying stocks in a setup similar to that of a stablecoin.

Luno is a regulated financial services provider, permitted to offer trading in crypto assets. Our tokenised stock offering maintains the same high compliance standards that have made Luno South Africa's most trusted crypto platform. All underlying assets are held by regulated financial institutions.

Is Luno only offering tokenised shares of publicly traded stocks?

Yes. Publicly listed companies are subject to continuous disclosure requirements, audited financial statements, and ongoing regulatory scrutiny, allowing for a higher level of investor protection and transparency.

How will Proof of Reserves be handled for tokenised stocks and ETFs?

Proof of Reserves for your tokenised stock on Luno is handled comprehensively, covering both the tokens you hold and the underlying equities.

Luno will hold custody of the stock tokens that our customers purchase, and we will regularly publish verifiable Proof of Reserves for these tokens, demonstrating that we hold them in a 1:1 ratio against customer holdings.

Furthermore, Backed, as the issuer of these tokenised stocks, is a regulated entity, and the tokenised stocks themselves are well-regulated. The underlying traditional equities that back these tokens are held with regulated custodians in the US and Switzerland.

How is liquidity provided? Do you act as the counterparty to all trades?

Luno acts as the counterparty to your trades, providing liquidity. This means you can buy and sell directly with Luno at the quoted price, without needing to match with another buyer or seller on an order book. Luno, in turn, manages the underlying liquidity with our regulated partners (like Kraken) to ensure we can facilitate your trades seamlessly.

Where does the credit risk/balance sheet risk sit?

Legal ownership of the crypto assets (which include any xStocks you might hold) remains with you, the customer, at all times. In the unlikely event that Luno were to go into liquidation, neither Luno nor any third-party creditors would have a claim against your crypto assets held on Luno’s platform.

You will be able to verify that Luno securely holds all of the tokenised stocks reflected in your Luno account through our regularly published Proof of Reserves report.