- Coinbase aims to tokenize equities under U.S. SEC approval
- SEC decision will shape future of blockchain-based stocks
- Tokenized stocks promise 24/7 faster trades, lower transaction fees
Coinbase has made a major step in its product portfolio diversification by seeking SEC approval to offer tokenized stock trading. This initiative would enable customers to buy and sell digital tokenized equities directly through blockchain. The step will see Coinbase compete with traditional brokerage companies and expand its portfolio beyond cryptocurrencies.
Blockchain-based Tokenized Equities
The company intends to tokenize the company shares and turn them into tradeable digital tokens that are stored and transferred through blockchain technology. These tokens represent direct ownership of publicly listed companies, but operate like cryptocurrencies. This model streamlines the trading process by decreasing the need to use intermediaries.
Tokenized equities could minimize expenses, decrease settlement duration and permit 24/7 access to the market. Coinbase seeks to have regulatory clarity to make this service fully compliant in the U.S. The exchange has not announced a launch date or whether it has submitted its official application.
Coinbase Seeks SEC Nod
Coinbase would require a no-action letter or exemptive relief by the U.S. Securities and Exchange Commission in order to proceed. A no-action letter implies that SEC staff will not recommend enforcement action in case Coinbase proceeds. Exemptive relief allow the firm to offer tokenized stocks while operating outside current regulatory structures.
Coinbase has not been registered as a broker-dealer according to the existing U.S. law, and that is why SEC clearance is necessary. It is not allowed to legally trade securities such as tokenized forms of equities without registration. The proposed product would therefore require regulatory exemptions before becoming operational.
Strict U.S Regulation Stalls Institutional Tokenized Equities
Although such products have not been approved in the U.S., similar products are offered in other countries. In April, Kraken launched xStocks, a tokenized equities platform that is available in non-U.S. jurisdictions. These services convert traditional stock into blockchain-based tokens for global trading.
In the United States, the uncertainty in regulation still limits the national rollout of tokenized equities. According to the World Economic Forum, liquidity and the lack of common standards are the major adoption barriers. However, interest in such digital assets continues to grow among financial institutions.
Coinbase follows a trend in the crypto industry toward regulated financial products. The SEC has softened its enforcement actions of cryptocurrencies under the current Trump administration. The commission dismissed previous cases against Coinbase and other major exchanges when policy changed.
Paul Grewal, the chief legal officer of Coinbase, stressed that such innovations should be introduced with clear regulations. According to him, the lack of regulatory assurance has stalled the participation of institutions in blockchain-based finance. The company considers this initiative as a strategic expansion in accordance with the U.S. compliance standards.
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