Coinbase, the leading cryptocurrency exchange in the United States, is actively pursuing regulatory approval from the Securities and Exchange Commission (SEC) to introduce tokenized stock trading. This initiative aims to establish Coinbase as a significant competitor to platforms like Robinhood and Charles Schwab.
Paul Grewal, Coinbase’s Chief Legal Officer, emphasized the importance of this venture in a recent interview, describing it as a “huge priority.” Tokenized equities involve converting traditional shares into digital tokens that can be traded on blockchain networks. Proponents of this innovative trading model advocate that it can significantly lower brokerage fees, enhance settlement speeds, and facilitate round-the-clock trading for investors.
However, there are challenges ahead. Currently, trading of tokenized equities is not permitted within the United States. Competitor Kraken has already launched its “xStocks” service outside the U.S., showcasing the potential of tokenized stocks on a global scale.
In order to move forward in the U.S. regulatory landscape, Coinbase would need to secure either a “no-action letter” or “exemptive relief” from the SEC. This would essentially provide assurance that Coinbase would not face enforcement actions for engaging in these transactions. Grewal did not clarify if Coinbase has officially submitted a request but noted that the uncertainty in regulatory guidance has made institutions reluctant to engage.
While Coinbase holds a broker-dealer license from a previously acquired entity, that license is not currently active. The push for tokenized equities comes amidst a broader shift in U.S. cryptocurrency policy, which has seen a decrease in legal actions against major exchanges.
If Coinbase’s request is approved, it could potentially unlock a new revenue stream and transform the landscape of retail investing. At the time of this report, Coinbase’s stock was trading at $250.02, reflecting a decline of over 4.55% in the last 24 hours.
This development not only highlights Coinbase’s ambition but also the growing acceptance and exploration of blockchain technology in traditional finance. As regulatory frameworks evolve, the future of tokenized trading could herald a new era of accessibility and efficiency in the markets.