Tokenized Stocks vs. Interactive Brokers: A Comparison for Global Investors
Compare tokenized stocks on GM Markets vs. a traditional account at Interactive Brokers. Explore key differences in onboarding, fees, custody, and asset utility for global investors.
Tokenized Stocks vs. Interactive Brokers: A Comparison for Global Investors
For international investors seeking access to US equity markets, the landscape of options is changing. The choice is no longer limited to traditional brokerages. The rise of on-chain finance presents a new alternative: tokenized stocks. Both established platforms like Interactive Brokers and new tokenization platforms like ours, GM Markets, offer pathways to US stocks, but they operate on fundamentally different principles.
This post compares the two approaches across the factors that matter most to a global investor: access and onboarding, costs and fees, custody and security, and what you can do with your assets after you buy them. We will use our own platform, GM Markets, as the direct example for the tokenized model to provide a clear, first-party account of how it works.
Access and Onboarding: Permissionless vs. KYC
The first and most significant difference is how you get access. The two models have opposing philosophies on user onboarding, which has direct consequences for privacy, speed, and accessibility.
The Traditional Brokerage Onboarding Process
Traditional brokers like Interactive Brokers are regulated financial institutions. They must comply with strict Know Your Customer (KYC) and Anti-Money Laundering (AML) laws in the jurisdictions they serve. This results in a data-intensive onboarding process that can be a significant barrier for global users. To open an account, an international investor must typically provide a comprehensive set of personal documents and information, including:
- Personal Identification: Full legal name, residential address, date of birth, and country of citizenship.
- Government-Issued Documents: A copy of a valid passport or other government-issued photo ID.
- Proof of Address: A recent utility bill, bank statement, or other official document verifying your residential address.
- Financial and Employment Information: Details about your income, net worth, investment experience, and employer.
- Tax Information: Your tax identification number and country of tax residency.
This process can take several days to complete as the brokerage verifies the submitted documents. The privacy trade-off is clear: you provide a significant amount of sensitive personal data, which is then stored in a centralized database. This creates a high-value target for data breaches, which can expose users to identity theft and financial fraud.
The Tokenized, Permissionless Model
Our approach at GM Markets is fundamentally different. We offer a permissionless onboarding process that prioritizes user privacy and immediate access. You can start trading by simply connecting an existing crypto wallet or creating a new, self-custodial wallet using your email or a social login. This process does not require you to submit personal identification documents or detailed financial information upfront. Because our platform is self-custodial, you control your own assets in your own wallet. This model significantly reduces the personal data you need to provide to get started, avoiding the creation of a centralized repository of sensitive information.
It is important to note that our services are not offered to users in the United States or other restricted jurisdictions. This approach allows us to provide a streamlined, globally accessible platform for users in eligible regions.
Custody and Security: Who Holds Your Assets?
How your assets are held is another critical distinction. This affects the security of your holdings and what happens in a worst-case scenario.
Brokerage Custody at Interactive Brokers
When you buy a stock through Interactive Brokers, the shares are held in a segregated brokerage account in your name. These accounts are protected by regulations like the Securities Investor Protection Corporation (SIPC) in the US, which provides insurance against the failure of the brokerage firm. SIPC protects securities up to $500,000 per customer, but this does not cover losses from market volatility. You are the beneficial owner of the shares, but the broker acts as the custodian, controlling the asset on your behalf.
Self-Custody and 1:1 Backing on GM Markets
On our platform, every tokenized stock is backed 1:1 by a real, underlying share. We hold these underlying shares in segregated, bankruptcy-remote accounts at regulated third-party broker-dealers, including Interactive Brokers and Alpaca Markets. This means your assets are never on our balance sheet.
The key difference is custody of the token. You hold the tokenized stock directly in your own wallet. This is known as self-custody. You have direct control over your private keys and your assets. This model removes the platform as a single point of failure for the custody of your specific assets. To ensure transparency, we provide a real-time, on-chain Proof of Reserves. This system, attested by the independent provider Accountable, allows anyone to verify that the total supply of a tokenized stock on-chain matches the number of real shares held in custody. In the event GM Markets were to discontinue operations, a designated security agent would work with the custodian to redeem outstanding tokens for the underlying shares, a process enforced by the on-chain contract itself.
Trading Fees and Total Cost
The fee structure is often complex at traditional brokerages, while the on-chain model aims for simplicity. The friction of legacy finance is well-documented. According to the World Bank's data from the first quarter of 2024, the global average cost to send cross-border remittances was 6.41 percent. Banks were the most expensive channel at over 12 percent, highlighting the high costs embedded in the traditional system. Our model is designed to reduce this friction.
Interactive Brokers Fee Structure
Interactive Brokers is known for competitive pricing, but the total cost for an international investor can be multifaceted. Costs can include:
- Trading Commissions: These vary by market and can be either a fixed price per share or a percentage of the trade value.
- Currency Conversion Fees: If you fund your account in a currency different from the stock you are buying (e.g., funding with EUR to buy a USD stock), you will incur foreign exchange fees, typically around 0.20 basis points with a $2 minimum.
- Funding and Withdrawal Fees: Wire transfers from international banks can incur significant fees from both the sending and intermediary banks.
- Data and Inactivity Fees: Subscriptions for real-time market data can carry monthly charges, and some accounts may be subject to inactivity fees.
The GM Markets All-In-One Fee
Our pricing model is designed for simplicity. We charge a single trading fee that ranges from 0.10% to 0.20% (10 to 20 basis points), depending on your trading volume. This fee is included directly in the price you are quoted. The amount you see is the amount you get. There are no separate fees for deposits, withdrawals, currency conversion, custody, or account inactivity. Gas fees for on-chain transactions are abstracted away and paid by the smart account. This simplified structure makes it easier to calculate the total cost of your investment, a sharp contrast to the layered fee models that a 2024 McKinsey report notes are common in global payments.
Asset Composability: What You Can Do With Your Stocks
A final, crucial difference lies in what you can do with your assets once you own them. This is where the on-chain model introduces a completely new set of possibilities.
Traditional Stock Ownership
When you own a stock like TSLA or NVDA in a traditional brokerage account, its utility is limited. You can hold it or sell it. You cannot easily use it as collateral for a loan, lend it out for yield, or use it to provide liquidity in a trading pool without complex margin agreements managed by the broker. The asset is essentially locked within the brokerage's ecosystem.
On-Chain Composability
Tokenized stocks on GM Markets are standard ERC-20 tokens on networks like Base, Arbitrum, and Ethereum. This makes them "composable," meaning they can interact seamlessly with the broader ecosystem of decentralized finance (DeFi). This unlocks a range of possibilities. For example, you can:
- Access Liquidity Without Selling: Deposit your tokenized stocks into lending protocols like Morpho to borrow stablecoins such as USDC. This allows you to access capital without selling your equity position and creating a taxable event. Morpho already supports tokenized equity products, such as Centrifuge's deSPXA S&P 500 fund token.
- Earn Additional Yield: Your tokenized stock can become a productive asset. While not yet live, lending protocols like Aave are developing future versions of their platform (Aave V4) specifically designed to allow users to supply tokenized real-world assets like stocks to earn lending yield.
- Amplify Exposure: Advanced users can employ strategies like a "carry trade" or "looping." This involves borrowing stablecoins against a tokenized stock, using the stablecoins to acquire more of the same tokenized stock, and redepositing it as collateral. This strategy is profitable if the total return of the stock (price appreciation plus dividends) exceeds the borrowing cost of the stablecoin.
This ability to integrate your equity holdings with other on-chain financial services is a primary advantage of the tokenized model. It transforms a static investment into a dynamic piece of collateral.
Conclusion: Choosing the Right Platform
The choice between a traditional broker and a tokenization platform depends on your priorities. If you prefer a long-established regulatory framework and are comfortable with a KYC-heavy process, a broker like Interactive Brokers is a solid choice. If you prioritize privacy, speed, self-custody, and the ability to use your assets within the broader DeFi ecosystem, the tokenized model offers a compelling alternative. Our platform is built for global investors who want direct, on-chain exposure to US markets with a simple fee structure.
Please remember that investing in any asset carries risk, and you should perform your own research. GM Markets does not provide financial advice. Our platform is in public beta and is not available to users in the United States or other restricted jurisdictions.
Frequently Asked Questions
Do I receive dividends with tokenized stocks?
Yes. We operate on 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 net asset value (NAV) of the token, so the value of the dividend is reflected directly in the token's price. You gain the economic benefit without a separate cash payout.
Are tokenized stocks regulated?
The regulatory landscape for tokenized assets is evolving globally. At GM Markets, we ensure the underlying assets are held securely at regulated broker-dealers. The tokens themselves are on-chain instruments that you control. Users are responsible for complying with the laws in their own jurisdiction.
What are the risks of tokenized stocks?
Like any investment, tokenized stocks carry risk. This includes market risk, as the value of the underlying stock can go down. There are also risks specific to the on-chain environment, such as smart contract risk and settlement risk. We mitigate these through rigorous smart contract audits and by partnering with established, regulated market makers. You can learn more on our security page.
