The crypto exchange, which is the largest in the U.S., aims to bring tokenized equities to U.S. investors.
Coinbase, the largest United States-based centralized crypto exchange (CEX), is seeking approval from the U.S. Securities and Exchange Commission (SEC) to offer tokenized equities to its users, according to a report by Reuters.
If approved, the initiative would allow Coinbase to offer stocks represented by digital tokens on-chain, facilitating faster, cheaper, and around-the-clock trading. The company’s chief legal officer, Paul Grewal, described the effort as “a huge priority” in an interview with Reuters.
Notably, tokenized stock trading is not currently permitted in the U.S. and Coinbase would need a no-action letter or exemptive relief from the SEC to move forward with the initiative. The company is also not registered as a broker-dealer, which is another potential hurdle.
“With a no action letter, an issuer of a tokenized equity or a platform that wishes to offer secondary trading in those equities can have some confidence, some comfort, that the SEC has adopted its view of why this product is compliant,” Grewal told Reuters.
Commenting on the SEC’s stance on tokenized equity trading, Chuck Zhang, CFO of web3 payments infra firm PolyFlow, told The Defiant that the SEC’s concern is the task of regulating expanded access to securities trading:
“I would argue blockchain-based stocks isn’t controversial, the interchangeability between token and equity is. That’s where the SEC gets nervous as they’re not ready to police equities traded via tokens across borders, 24/7. Enforcement of insider trading, disclosures and custody is unresolved.”
Zhang also noted that tokenized stock trading from a crypto-native firm — even a centralized exchange — would threaten the dominance of traditional brokers. “What threatens them isn’t just tech, it’s the new access model. Permissionless trading, fractional shares, and 24/7 markets will force incumbents to adapt or exit,” Zhang argued.
Progress Outside the US
This isn’t the first time a crypto exchange has explored tokenized equities. Binance previously launched tokenized stocks on its global, non-U.S. platform in 2021. However, those efforts were short-lived, in part due to regulatory roadblocks.
Meanwhile, crypto exchange Kraken just last month launched a similar service abroad called xStocks. The move offers tokenized versions of U.S. stocks like Apple, Tesla, and Nvidia on the Solana blockchain to users outside of the U.S.
This expansion into tokenized assets comes as the real-world asset (RWA) sector is now one of the fastest-growing in decentralized finance (DeFi). In the past month alone, the total value of on-chain RWAs has grown by nearly 6% to surpass $23.9 billion, according to RWA.xyz.
This news by Coinbase comes after the company unveiled several initiatives earlier this week, including perpetual swaps, a Bitcoin rewards credit card, and in-app access to assets trading on Ethereum Layer 2 network Base, which Coinbase developed.
Coinbase became a publicly traded company in a direct listing on the Nasdaq exchange in 2021. And then, this past May, it was included in the S&P 500 — marking a milestone for crypto. The company’s stock, COIN, is currently trading at $252, down 3.5% on the day.
The Defiant reached out to Coinbase for comment and was directed by an official representative to an X post from Grewal from earlier today, who said that the news shouldn’t come as a shock: “We’ve been saying since earlier this year that @SECGov should enable markets to unlock tokenized securities.”
