Coinbase, one of the largest cryptocurrency exchanges in the world, is seeking approval from the U.S. Securities and Exchange Commission (SEC) to offer tokenized equities. This move could potentially place Coinbase in direct competition with established stock trading platforms like Robinhood and Charles Schwab.
According to a report by Reuters, Coinbase’s Chief Legal Officer, Paul Grewal, revealed in an interview that the company is actively pursuing permission from the SEC to provide stock trading services through blockchain technology. If approved, Coinbase would be able to offer tokenized equities, which are digital tokens representing shares in a company, allowing investors to trade them similarly to cryptocurrencies.
The initiative to offer tokenized equities is seen as a “huge priority” for Coinbase. Proponents of this model believe that it could help reduce trading costs, expedite settlement processes, and enable round-the-clock trading. However, critics have raised concerns about challenges such as low liquidity in secondary markets and the absence of global standards.
While tokenized equities are not yet available for trading in the United States, some companies, like Kraken, have started testing the model in international markets. To legally offer tokenized equities in the U.S., Coinbase would require a “no action letter” or exemptive relief from the SEC, indicating that the regulatory body does not object to the offering.
The lack of regulatory clarity in the crypto space has been a significant hurdle for Coinbase and other companies looking to launch blockchain-based financial products. Coinbase is not currently registered as a broker-dealer, and the company faced a lawsuit from the SEC in 2023 for allegedly operating as a broker-dealer without proper registration. The case was later dropped under the Trump administration earlier this year.
Despite the potential benefits of tokenized equities, regulatory uncertainty and the need for SEC approval have slowed institutional interest in these products. Grewal did not confirm whether Coinbase had formally submitted a request to the SEC or provide a timeline for the potential launch of tokenized stock trading services.
In conclusion, Coinbase’s pursuit of SEC approval to offer tokenized equities reflects the growing intersection between traditional finance and the cryptocurrency industry. If approved, this move could open up new opportunities for investors and potentially disrupt the existing landscape of stock trading platforms.
References:
1. Reuters: Coinbase seeking US SEC approval to offer blockchain-based stocks
2. CoinTelegraph: Coinbase is seeking SEC approval for ‘tokenized equities’ — Report
3. FinanceMagnates: Coinbase Seeks SEC Approval to Launch Tokenized Stock Trading
