Key Takeaways
- Coinbase seeks SEC approval to offer tokenized equities, aiming to compete with retail brokers like Robinhood and Charles Schwab.
- Tokenized equities use blockchain technology to represent company shares, potentially reducing trading costs and enabling faster settlements.
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Coinbase plans to launch tokenized stock trading for its users, a step that could bring the exchange into direct competition with major retail brokers such as Robinhood and Charles Schwab, Coinbase’s legal chief, Paul Grewal, told Reuters in a recent interview.
Following its milestone entry into the S&P 500, the leading crypto platform is now pursuing regulatory approval to launch blockchain-based equity trading, a top strategic goal according to Grewal.
To offer tokenized equities in the US without exposing themselves to enforcement risks, companies often seek a no-action letter from SEC staff. A no-action letter is a formal assurance that the SEC will not recommend enforcement action if the company proceeds with a particular activity.
Companies may also request an exemption from certain regulatory requirements in order to legally offer tokenized securities.
A no-action letter will give Coinbase a certain level of “comfort” and “confidence” that the SEC views their specific plan for offering tokenized equities as compliant with current securities laws, Coinbase CLO noted.
“It’s that confidence that has been lacking so far, and I think really held back a lot of the institutional adoption” of crypto and blockchain technology, he added.
Coinbase has revisited its initiative to tokenize its own $COIN stock, part of a strategy to advance the use of security tokens in the US market amid regulatory developments. Tokenized equities, however, remain unavailable for trading within the country.
Grewal did not specify whether Coinbase has submitted a formal request to the SEC or provided any timeline for a potential product launch.
Coinbase’s plan comes after Kraken announced in May the upcoming release of xStocks, tokenized versions of 50 US stocks and ETFs such as Apple, Tesla, Nvidia, and SPDR S&P 500 ETF for non-US investors through the Solana blockchain.
Kraken co-CEO Arjun Sethi has projected that tokenized equities could eventually surpass stablecoins in market size due to their potential to enhance transparency, efficiency, and global accessibility in capital markets.
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