Tokenization of ETFs trend and tax implications in Ireland

kursk

I do wonder if with recent trend of tokenizing ETFs by crypto exchanges (Kraken, Robin Hood, etc) it is opening a door to invest in ETFs while taxing them (Ireland) as crypto assets through CGT and income tax instead…

Thoughts?

Supercell

Wow! Now that's fascinating, haven't heard of this before.

If these tokens are liquid it does seem like a good alternative to ETFs. Definitely going to do some research on this, thanks.

Jim2007

https://www.boards.ie/discussion/2058418543/tokenization-of-etfs-trend-and-tax-implications-in-ireland

I presume what you mean is securitization. It's very unlikely they even considered listening on European markets because of the disclosure requirements. Many what you might call traditional fund managers decided not to and I think at this stage the questionable ones that did have delisted. There documents would be worse that the lower end of the junk bond market.

kursk

I am certainly not an expert to tell whether under European law those would be considered a “security”, but technically speaking I think it is tokenized in the form of a crypto asset, traded in crypto platforms and definitively opened to European investors

See:
https://www.etfstream.com/articles/robinhood-launches-tokenised-access-to-200-us-etfs-and-stocks-in-europe

Considering it is technically a crypto asset, I was hoping it would qualify as such for tax purposes…

Supercell

If these are indeed treated as crypto only then it would be fantastic, would open us up to far safer retail investing overall.

Interestingly KID's are there for all the ETFs even though they are tokenized US ones. Looks like Robinhood did their homework here. Trades are on the Arbitrum blockchain so hopefully treated as pure crypto trading by the Irish Tax authorities with obvious CGT implications.

I created a Robinhood account and sure enough some of the bigger US ones are already there, exciting.

Out of interest I logged into the Kraken app for the first time in years but no option to buy them there, yet i guess, hopefully soon.

Here's another article about this -

https://blog.kraken.com/product/xstocks/tokenized-equities-now-available

Supercell

One further thing to consider from :

https://www.kraken.com/legal/xstocks

Holders of xStocks do not have ownership in any of the underlying stock or shares of the companies to which they are economically linked ("underlying stock"); instead, by purchasing xStocks investors can benefit from exposure to the performance of the underlying stock. Holders of xStocks have no voting rights, dividend or distribution entitlements, or legal claims to the underlying stocks or any residual assets in the event of the underlying company’s liquidation. 

So no dividends, if its an ETF you'll want the ACC version, something to keep in mind for the stock version too. I assume it is the same for Robinhood, will check.

Supercell

Surprisingly it would seem Robinhood will offer dividend support:

We’ve launched US stock and ETF tokens in the EU, giving eligible customers exposure to US equities with Robinhood Stock Tokens—featuring zero commissions or added spreads from Robinhood (other fees may apply), dividend support, and 24/5 access. With tokenized stocks, our European app transitions from being a crypto-only app to an all-in-one investment app powered by crypto.

European customers will have access to 200+ US stock and ETF tokens. Stock token holders will also receive dividend payments directly in their app.  

So looks like Robinhood is ahead in the game here, interested to see what peoples thoughts are on all of this.

https://newsroom.aboutrobinhood.com/robinhood-launches-stock-tokens-reveals-layer-2-blockchain-and-expands-crypto-suite-in-eu-and-us-with-perpetual-futures-and-staking/#:~:text=We%E2%80%99ve%20launched%20US%20stock%20and%20ETF%20tokens%20in,fees%20may%20apply%29%2C%20dividend%20support%2C%20and%2024%2F5%20access.

kursk

Thank you for sharing your additional research @Supercell - I share your excitement with its potential, some questions still in my mind

1. Whether those investments would qualify as crypto and therefore CGT (or income tax in case of dividends?)
2. How do those token works, and what guarantees they do provide; For example do they hold equivalent stock/ETF assets, are they audited, etc
3. Any other law, or risk implications by investing in those.

I will start exploring further myself, and try to talk with accountant and financial advisors looking for additional feedback, then share; Any other feedback coming from others in this thread would be very welcomed.

Cheers.

Supercell

According to RH they are derivatives, of which i have no idea how they tax treated in Ireland, maybe someone here does? CFD's are derivatives and are taxed at 33% so I suspect these might be the same but am no expert.

What are stock and ETF tokens?

They’re derivatives tracked on the blockchain that follow traditional stocks and ETF prices, giving you exposure to the US market.

How does stock token investing work?

You can place orders during the week, or queue them over the weekend for when the market opens. Turn on price alerts to stay informed and make timely decisions. Stock tokens can’t be sent to other wallets or platforms at this time.

Are stock tokens taxed?

They’re typically treated like other derivative investments but may vary by region. Consult a tax professional for specific guidance.

https://robinhood.com/eu/en/invest/

kursk

ChatGPT suggest CGT for individuals as long as it is done as investment

https://chatgpt.com/share/6864ebf2-5540-8006-9d80-e293852a84c5

Supercell

Also here -

International_Comparative_Legal_Guide_-_Derivatives_2025_Ireland.pdf

6 Taxation6.1 Are derivatives transactions taxed as income or capital in your jurisdiction? Does your answer depend on the asset class?

In Ireland, derivatives are taxed according to standard taxation principles and may be taxed as both income or capital depending on the purpose of the transaction and the asset that is the subject of the transaction. Typically, if derivatives transactions are entered into solely for the purpose of trading, any gains or losses from such derivatives may be considered as trading income or losses. Whereas, if derivatives transactions are entered into for investment purposes or in respect of a capital asset, the gains or losses are more likely to be subject to capital gains taxation

For most of us who are not day traders I would imagine this implies CGT rules apply with income tax on dividends as per usual.

I hope they add some European ETFs in time such as the German DAX ones for diversification. Also beats having to pay Stamp duty on UK based ITs such as JAM and ATT

kursk

Personally I am looking for MSCI World, but don’t mind other options.

Any thoughts on “guarantees” of those tokens? Will they be backed by real ETF assets? I would assume so, audited regularly? etc

Cheers

Supercell

https://www.boards.ie/discussion/comment/123598265#Comment_123598265

See here - https://cdn.robinhood.com/assets/robinhood/legal/stock_tokens_kid_eu.pdf

amacca

At the risk of being a party pooper and echoing some of the questions above...what kind of security/guarantee would an investor in these have?

I'm not talking about normal rise/fall in value

But funds guarantee, if you don't own the underlying asset/etf....then what (if any) additional risk above and beyond purchasing the ETF are you exposed to and is this mitigated against etc

If its a CFD then is leverage involved, could losses be magnified, is the investor exposed...is there a custodian bank

Also if it is CFDs then surely its essentially betting and any gains shouldn't be taxed at all...to hell with even cgt if that's the case 😀

lau1247

https://www.boards.ie/discussion/comment/123605015#Comment_123605015

Saw this last week.

https://youtu.be/C9dqvMC3CUI?feature=shared

And another one 1.5 week ago.

https://youtu.be/KS_1uIKWTZs?feature=shared

It seems like it may or may not be backed by underlying stock, you have no way to know (??). Unless I am missing something

thatsdaft

https://www.boards.ie/discussion/comment/123597544#Comment_123597544

From what I gathered they bought bitstamp (ah the memories of early crypto days) and from that got a pile of European licenses and got ahead of kraken in Europe with these crypto assets

Very interesting development alright, Bloomberg Odd lots had a podcast recently with robinhood guy

https://open.spotify.com/episode/6zMcTD2XLNCYnce7Dj1Fnn