80% of demand for tokenised assets come from emerging markets, says Binance’s SB Seker

Tokenised assets are finding their strongest foothold in emerging markets, where high entry costs and limited access have long kept global investment products out of reach for ordinary investors. About 80% of demand for tokenised US equities and other instruments comes from emerging markets, according to SB Seker, head of Asia Pacific at Binance.

Edited excerpts from a chat on the sidelines of India Blockchain Week:

Binance’s bStocks offer 24/7, on-chain access to US equities and other tokenised financial instruments. Given the access and affordability barriers in emerging markets, can tokenised assets become the next major growth engine for global capital markets?


SB Seker: When we launched tokenised versions of US equities and other instruments, about 80% of the demand was from emerging markets.

In developed markets, you usually do not have this access problem. It is in emerging markets where you particularly have this access problem. So, 80% of the trade volume is from emerging markets.

The other thing that is really interesting is the size of investment. Ninety percent and more of the investments so far are very small. The median is about $18, but the entry point we set was $5.

That is telling, because our hypothesis was that people want to buy these assets, but there is an affordability issue. Maybe a bond lot is too expensive for most people.

The same could apply to any instrument. Maybe it is too expensive for someone in an emerging market to buy US equities at the size at which they are offered.

When you tokenise something, you can fractionalise it and bring it to a price point that someone can buy into. People want to invest, but only up to their level of affordability.

That is where our hypothesis has come true. People are looking for a specific price point. I bet that if we dropped it even lower, participation rates would increase.

But there is also a price floor, because we are working with issuers and custodians, and there is a certain minimum price for these products in the market.

How large is the tokenised US equity opportunity?

SB Seker: We have proven that there is definitely pent-up demand globally. The market is excited about getting access, probably for the first time in investment history, to a universal range of instruments from markets around the world.

We do not, at this point, package bundles of instruments. We are leaving it to users to buy whatever they want because this is a data-acquisition point for growth.

We want to see what people actually want to buy, where they are coming from and what they are buying.

We are very bullish on this. We have reached more than $1 billion in trading revenue from tokenised US equities. B Stocks have reached more than $1 billion in revenue in less than three months—by some metrics, in less than one month.

It is explosive growth, and we are doubling down on this in terms of investment and scale.

We need to find more partners and issuers to work with. We need to work with script holders at scale who have enough inventory to back the assets we are selling.

That is a constraint, but we are looking for a thicker pipeline. For example, we work with Alpaca in the US, but we need more such partners globally.

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What is the demand for US Treasuries compared with US equities?

SB Seker: Predominantly, the demand is for US Treasuries or US equities. Before September this year, 95% of the tokenisation market was in private credit and US securities. That demand has shifted somewhat into US equities.

When people move from a classic portfolio, they have overbought debt and bonds, and they are moving into higher-growth instruments such as equities to balance their profile.

I think we are seeing a rotation away from the initial overinvestment in tokenised debt and bonds, because those were the only products available at the time, towards equities.

I think it will eventually settle around what you normally expect in a portfolio—a 60:40 or 70:40 split. But at the moment, we are seeing growth in this rotation.

In many emerging as well as developed markets, we see heavy institutional appetite for US equities but not so much in India. Is it changing?

SB Seker: We are getting a lot more interest from family offices because I think they are looking at this as a long-term part of their growth.

We have had some interest from funds, fund managers and fund issuers, but it is nowhere near what we are seeing from family offices.

In India, I feel there is a bit of a lag in institutional adoption, but it is catching up. India is behind other markets like Korea, but it is catching up.

Is the disappointment with Indian equities pushing retail investors towards crypto?

SB Seker: I think we are seeing the shift playing out on the retail side.

Maybe that is the reason the retail market is pivoting towards crypto: there is a lack of viable alternatives within structured products.

From my vantage point, I am not sensing any key interest from funds to include crypto as part of their offerings. We have not seen that interest come through.

Is the Indian crypto market maturing beyond speculation?

SB Seker: I definitely think that is the case, for two reasons.

One is market risk. You are not seeing the 2021 returns. The market has flattened. If you are chasing yield, this no longer makes sense as a short-term strategy.

Unless you are trading at scale—as a market maker or a day trader—and can deploy massive capital for arbitrage, it does not make sense for the average person anymore.

Secondly, platforms like ours build processes to put a brake on excessive risk-taking.

For example, if you are trading complex instruments, you need to take a knowledge, skill and ability test, as you would when buying an insurance product. You need to demonstrate that you have the requisite knowledge and ability to handle those products.

Platforms like ours build these standard capital-market measures into crypto structures because we apply the same risk-based approach.

If a retail customer cannot answer those questions, they cannot get through the test or access the products. So the pursuit of maximum returns through highly risky products is not happening at scale anymore.

We have come a long way from the days when you could buy anything with maximum leverage.

Now, most responsible platforms have leverage limits, lending limits, loan-to-value ratios against margin lending, and knowledge, skill, awareness and ability tests.

Adoption in India is uniform across Tier 1, Tier 2, Tier 3 and Tier 4 cities. There is no particular age demographic that is especially inclined towards it. The only skew is gender, but even that gap is closing.

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What should be the crypto allocation for a beginner?

SB Seker: There is no cookie-cutter response. It depends on your personal circumstances, risk appetite, time horizon and capacity for capital allocation.

If I were talking to a beginner, I would say: shadow trade for a while to understand how the whole thing works—wallet infrastructure, on-chain transfers, gas and DeFi protocols.

There is a lot to learn. Spend time learning that first. Only when you feel comfortable should you make crypto a part of your portfolio.

When it comes to my own portfolio, my rule of thumb is nothing more than 3%.

If I were a beginner, I would begin with traditional financial instruments and gradually increase my exposure to crypto.

In the post-Covid boom, crypto was being billed as an alternative to gold but that appeal now looks lost. What do you think?

SB Seker: Those statements were too early because there was not enough data to form meaningful conclusions.

The correlation has changed. For a while, there was a correlation when money moved out of traditional instruments and into crypto.

Depending on lending and interest rates, people moved into crypto in search of higher yield. That correlation is also breaking down.

Now, the correlation with gold is getting stronger. But we do not have enough data over a long enough period to make meaningful assessments about what it will be in the long run.

It is not a stable relationship. You cannot say that one thing causes another.

When it comes to an investment thesis on crypto, you have to use your own judgement. You should not rely on the correlation or diversification potential of crypto. Even if you do, you have to discount it for the high risk.