Targeting the traditional brokerage market, blockchain technology disrupts the stock trading model
Coinbase, the largest cryptocurrency exchange in the US, is actively seeking approval from the SEC to launch tokenized stock trading services, which will allow investors to trade digital versions of traditional stocks on the blockchain network.
Coinbase Chief Legal Officer Paul Grewal told Reuters that this plan is a "major priority" for the company, and if approved, it would allow Coinbase to compete directly with traditional brokers like Robinhood and Charles Schwab.
Tokenized stocks are an innovative model that converts company shares into digital tokens, where investors hold blockchain tokens that represent ownership of equity instead of traditional stock certificates. This trading method is similar to cryptocurrency trading, enabling more convenient ownership transfers.
Grewal pointed out that tokenized stocks have potential advantages such as lowering transaction costs, speeding up settlement times, and offering 24/7 trading.
Currently, tokenized stocks are not legally traded in the US, but competitor Kraken has piloted a service called xStocks in overseas markets, covering over 50 US-listed stocks and exchange-traded funds, with service areas including Europe, Latin America, Africa, and Asia. Coinbase's timing aligns with the relatively friendly regulatory environment for cryptocurrencies after the Trump administration took office.
Further Reading
24/7 Trading! Kraken Will Launch Tokenized US Stocks, How Are They Different from Regular Stocks
Regulatory approval is key, SEC's attitude shifts to favor development
To launch tokenized stock services, Coinbase needs to obtain special permission from the SEC, possibly in the form of a 'no-action letter' or exemption from enforcement actions. A no-action letter means that SEC staff will not take enforcement action as Coinbase advances its tokenized stock business. However, Grewal declined to disclose whether the company has officially submitted an application to the SEC and did not provide a timeline for the service launch.
Coinbase is currently not registered as a broker, and providing securities trading services typically requires such registration. The SEC had sued Coinbase in 2023 for operating a brokerage business without the necessary registration, but that case was dismissed after the Trump administration took office. It is noteworthy that Coinbase acquired a brokerage in 2018, but that affiliated company has not engaged in client business activities since being acquired.
After the Trump administration took office, the SEC adopted a more friendly stance towards cryptocurrencies. New SEC Chairman Paul Atkins confirmed the plan for innovation exemptions, allowing DeFi builders to experiment with new products on-chain. The SEC also established a dedicated digital asset working group, led by Commissioner Hester Peirce, aimed at formulating modern guidelines for digital assets.
Further Reading
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Global layout strategy progresses, UK market becomes an important springboard
While waiting for SEC approval, Coinbase is actively expanding into global markets. The company expects to obtain an operating license under the EU's Markets in Crypto-Assets Regulation (MiCA) and has registered as a Virtual Asset Service Provider (VASP) in the UK. The UK is becoming a popular choice for cryptocurrency companies due to its relatively relaxed regulatory environment.
Coinbase CEO Brian Armstrong also expressed optimism in a post yesterday (6/17), stating that the UK has tremendous potential to become a hub for cryptocurrency companies. This indicates that Coinbase is strategically competing for global market access to diversify its reliance on US regulatory approvals.
Image Source: X Coinbase CEO Brian Armstrong states that the UK has tremendous potential to become a hub for cryptocurrency companies
Coinbase attempted to issue a tokenized version of COIN stock during its IPO process in 2021 but failed to obtain SEC approval.
A company spokesperson stated: "As the first publicly listed major cryptocurrency company, we hope to see a crypto-native version of our stock. We are considering various options to bring tokenized innovation to traditional financial assets like securities."
Industry prospects are promising, new revenue sources are highly anticipated
Tokenized stocks represent a significant attempt by Coinbase to expand its functional business scope and seek new revenue sources. Despite challenges such as insufficient liquidity in the secondary market and a lack of global uniform standards, supporters believe that this approach can reduce transaction costs, achieve faster settlement times, and provide the possibility of 24/7 trading.
Grewal stated on social media: "Exciting? Yes. Important? Absolutely. But is this breaking news? Not exactly. We have been saying since the beginning of this year that the SEC should allow the market to unleash the potential of tokenized securities." He emphasized that tokenized debt, equity, and investment funds provide tailored regulatory opportunities for securities offered and traded through digital-native methods.
Image Source: X Coinbase Chief Legal Officer Paul Grewal expresses excitement on social media
As of press time, Coinbase's stock price (NASDAQ: COIN) reported $253.85, down about 2.95% in the past 24 hours. The company joined the S&P 500 index in May, becoming the first US cryptocurrency company to enter the index. With the improvement of the regulatory environment and the promotion of industry innovation, tokenized stocks are expected to become an important milestone in the integration of traditional finance and blockchain technology.
Image Source: Google Finance Coinbase's stock price (NASDAQ: COIN) reported $253.85, down about 2.95% in the past 24 hours
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'Coinbase also wants to offer stock tokens? Has applied to the SEC, aiming to enter the RWA market!' This article was first published in 'Crypto City'
