How to Buy Tokenized Stocks on Ethereum: A Complete Guide
Learn how to buy tokenized stocks on Ethereum with GM Markets. This guide covers the step-by-step process, DeFi benefits, on-chain security, and regulatory landscape.
How to Buy Tokenized Stocks on Ethereum: A Complete Guide
What Are Tokenized Stocks on Ethereum?
Tokenized stocks are digital representations of real-world company shares that exist on a blockchain. On our platform, we issue these as ERC-20 tokens, the technical standard for fungible assets on the Ethereum network. This design makes them natively compatible with Ethereum's extensive ecosystem of wallets, trading tools, and decentralized finance (DeFi) applications.
Crucially, every tokenized stock we issue is fully backed 1-to-1 by a corresponding share of the actual stock. These underlying shares are held in a segregated customer account at a regulated broker-dealer. This is not a synthetic derivative that merely tracks a price; it is a token that represents a direct economic interest in the underlying security. This approach aligns with guidance from U.S. financial regulators. In a joint statement, the staff of the U.S. Securities and Exchange Commission (SEC) affirmed that the technology used to issue a security does not change its legal status. This principle of "technological neutrality" means that existing legal frameworks apply fully to tokenized securities, providing a clear and established basis for their operation. You can learn more about the specific structure of our tokenized stocks on our platform.
The Growing Market for On-Chain Assets
The movement to bring real-world assets (RWAs) like stocks onto blockchains is a rapidly growing sector of the financial industry. Authoritative reports project significant expansion in the coming years. For example, a June 2024 report from McKinsey & Company, "From ripples to waves: The transformational power of tokenizing assets," projects that the market for tokenized assets could reach approximately $2 trillion by 2030, with more optimistic scenarios reaching as high as $4 trillion. This forecast specifically excludes established cryptocurrencies and stablecoins.
This growth reflects a fundamental shift toward making global financial markets more accessible, efficient, and programmable. By bringing U.S. equities to the Ethereum network and other compatible chains, we are part of this foundational change, providing a secure and compliant bridge between traditional and decentralized finance.
Why Buy Tokenized Stocks on Ethereum?
Trading stocks as on-chain tokens unlocks several distinct advantages that are not available through traditional brokerage accounts. These benefits center on composability, custody, and accessibility.
DeFi Composability
Because they are standard ERC-20 tokens, your tokenized stocks can interact seamlessly with other DeFi protocols. This means your equity position can become productive capital. For example, you can use your tokenized assets as collateral for borrowing and lending on protocols like Aave and Morpho, supply them as liquidity to automated market makers like Uniswap or Curve, or use them to post margin on decentralized perpetuals protocols. This composability turns a static holding into a dynamic financial tool.
Self-Custody and Security
You hold your assets directly in your own wallet, giving you full control. We support connections from external wallets like MetaMask or offer a secure, embedded wallet created with an email or social login. Our embedded wallets are protected by multi-party computation (MPC), a cryptographic technique that ensures no single party—not you, not us, not our infrastructure providers—holds the complete private key. This significantly enhances security against single points of failure. You can learn more about our comprehensive security features on our platform.
Permissionless Global Access
For investors around the world, our platform provides a direct path to U.S. equity markets, removing the friction often associated with traditional international brokers. Onboarding is wallet-native and permissionless, allowing you to access global markets from where you are. Please note that GM Markets is not offered to users in the United States or other restricted jurisdictions.
Fractional Ownership and Low Minimums
You can buy precise fractions of any stock with as little as $1. This makes it possible to invest in high-priced stocks like NVIDIA (NVDA) or Tesla (TSLA) without needing to purchase a full share, allowing for greater diversification and more precise portfolio allocation.
How to Buy Tokenized Stocks on GM Markets: A Step-by-Step Guide
We designed our platform to make buying tokenized stocks on Ethereum a simple and intuitive process. Here is how it works in five steps.
- Connect Your Wallet: The first step is to connect to our platform. You can use an existing self-custody wallet through MetaMask or WalletConnect, or you can create a new, secure embedded wallet in seconds using an email or social login.
- Deposit Funds: To fund your account, you can deposit stablecoins like USDC or USDT from supported networks. We unify these deposits into a single USDF balance on our platform, which you can use for trading across all available assets and chains.
- Select a Stock: Navigate to our markets page to browse the U.S. stocks and ETFs available for trading. You can search for a specific ticker, such as TSLA for tokenized Tesla, and view its current price and other market data.
- Execute Your Trade: When you are ready to buy, you enter the amount you wish to purchase. Our platform uses a Request-For-Quote (RFQ) system, which provides a firm price from professional market makers with no slippage, provided you accept within the quote window. A key feature is gas abstraction; you do not need to hold ETH in your wallet to pay for transaction fees. We handle the native gas payment and deduct the equivalent cost from your USDF balance.
- Confirm Your Tokens: After the trade is complete, the ERC-20 tokens representing your stock position appear directly in your connected wallet. You can view your holdings on our platform's portfolio page or verify the transaction and token ownership on a block explorer like Etherscan.
Verifying Security and Backing On-Chain
Trust is built on verifiable transparency. We ensure that every tokenized stock is fully backed and that its reserves are auditable by anyone at any time.
- Regulated Custody: The real shares backing your tokens are held in segregated customer accounts at regulated U.S. broker-dealers, including Interactive Brokers and Alpaca Markets. This means they are held separately from the broker's own corporate assets.
- Real-Time Attestation: We partner with Accountable, a third-party proof-of-reserves provider, to monitor the shares held in custody and publish the data on-chain in real time. You can visit our Proof of Reserves page at any time to see the live backing ratio for every asset we offer.
- Smart Contract Audits: Our smart contracts have been rigorously audited by leading blockchain security firms, including Sherlock, Halborn, Cantina, and Cyfrin, to identify and mitigate potential vulnerabilities.
- Continuity Plan: In the unlikely event that GM Markets ceases operations, a designated security agent is empowered to work directly with the custodian to redeem all outstanding tokens for the underlying shares. This redemption path is enforced by an on-chain contract, ensuring your assets remain secure independent of our platform.
Understanding Costs and Dividends
We believe in a transparent and straightforward fee structure. Our only revenue comes from a single trading fee, which ranges from 0.10% to 0.20% (10 to 20 basis points) depending on your trading volume. You can see the full breakdown on our pricing page. There are no fees for deposits, withdrawals, or asset custody.
Dividends are handled through a total-return model. When a company like Apple pays a dividend, the proceeds are used to purchase more of the underlying AAPL shares. This increases the total value of the shares backing the token, which is reflected as an increase in the token's on-chain net asset value (NAV). Your return comes from the token's price appreciation rather than a separate cash payment.
All trading involves risk. The value of tokenized stocks can go down as well as up, and you may lose the amount you invested. These products carry settlement, counterparty, smart-contract, and custody risks. GM Markets does not provide financial advice. For more information, please review our legal and risk disclosures.
Frequently Asked Questions
Are tokenized stocks the same as owning actual shares?
Tokenized stocks provide you with the same economic exposure as owning the actual shares. Their value tracks the underlying stock price, and you receive the economic benefit of dividends through an increase in NAV. However, they do not typically convey shareholder rights, such as the right to vote at company meetings.
Do I need to hold ETH for gas fees on GM Markets?
No. Our platform uses gas abstraction, which means we pay the native Ethereum gas fees for your transactions on your behalf. The equivalent cost is then deducted from your stablecoin balance. This simplifies the trading process and removes the need for you to acquire and manage a separate balance of ETH.
How are dividends handled for tokenized stocks?
We use a total-return model. Dividends paid by the underlying company are automatically reinvested, purchasing more of the underlying stock. This increases the NAV of your tokenized stock, so the value of the dividend is reflected in the token's price.
Are tokenized securities regulated?
Yes. Regulators globally, including the U.S. SEC, have affirmed that when a digital token represents a security, it is subject to existing securities laws. The SEC's approach is technology-neutral, meaning the rules apply based on the economic reality of an instrument, not the technology used to issue or trade it. This regulatory clarity is essential for the long-term growth and stability of the on-chain asset market.
Start Trading on Ethereum with GM Markets
Buying tokenized stocks on Ethereum combines the value of traditional equity markets with the modern benefits of blockchain technology. Through our platform, the process is secure, efficient, and accessible. By abstracting away complexities like gas fees and providing institutional-grade security, we offer a direct path for you to add U.S. stocks and ETFs to your on-chain portfolio.
Explore the available tokenized stocks on our platform and begin your on-chain trading journey today. As a reminder, our services are not available to users in the United States or other restricted jurisdictions.
