Coinbase is seeking to expand its services by requesting approval from the U.S. Securities and Exchange Commission (SEC) to offer “tokenized equities” — digital tokens that represent shares of various companies. This innovative approach would enable customers to trade stocks using blockchain technology, mirroring the trading of cryptocurrencies. If granted, this initiative could position Coinbase in direct competition with established online brokerages like Robinhood, opening up a new revenue stream for the cryptocurrency exchange.
Paul Grewal, Coinbase’s Chief Legal Officer, emphasized that making tokenized equities available is a significant priority for the company. Proponents argue that this could lead to lower trading costs, quicker settlement times, and the possibility of stock trading around the clock. However, there are concerns regarding low liquidity in secondary markets and the lack of defined regulatory frameworks globally. For Coinbase to proceed with this endeavor in the U.S., it will need either a no-action letter or exemptive relief from the SEC, ensuring the agency will not take legal action against the company.
Currently, tokenized equities are not permitted in the U.S., though other international companies are experimenting with them. For example, rival exchange Kraken has plans to launch “xStocks,” tokenized representations of major companies like Apple and Tesla, for users outside of the U.S. Additionally, Kraken has introduced commission-free stock trading in select parts of the U.S. and has plans for further global expansion.
As for Coinbase’s stock performance, analysts maintain a Moderate Buy consensus on COIN, with 12 Buy ratings, 11 Hold ratings, and no Sell ratings recorded in recent months. The average price target for COIN stands at $264.67 per share, suggesting a potential upside of 3.7%.
Overall, Coinbase’s ambition to widen its trading offerings through tokenized equities represents a bold step towards the integration of blockchain technology into traditional financial markets, promising to reshape how stock trading may operate in the future.