Paul Grewal, Chief Legal Officer of the U.S. cryptocurrency exchange Coinbase, told Reuters on Tuesday that the company is striving for regulatory clarity in order to introduce tokenized stocks to the U.S. market. If approved, this would allow the exchange to offer blockchain-based trading of traditional stocks, competing with brokerages like Robinhood and Charles Schwab.
Tokenization of stocks refers to the process of converting company shares into digital tokens, similar to the way cryptocurrencies are traded, where investors do not directly hold the securities but instead hold tokens that represent ownership of those securities. Compared to traditional infrastructure, tokenized stocks are expected to achieve faster settlement speeds, round-the-clock trading, and lower costs.
Grewal stated that this plan is a 'top priority', and Coinbase is seeking a no-action letter or exemption from the U.S. Securities and Exchange Commission (SEC), which would indicate that SEC staff would not take enforcement action against the exchange's launch of tokenized stocks. Grewal noted that regulatory uncertainty has been a major barrier to the widespread adoption of blockchain securities trading.
In May of this year, Coinbase's competitor Kraken announced it would offer tokenized stock products called xStocks to specific non-U.S. markets globally, allowing users to gain exposure to a number of popular U.S. listed stocks and ETFs, and enabling trading around the clock.
Coinbase attempted to issue a tokenized version of its own stock (ticker symbol COIN) during the S1 filing period in 2021, but ultimately did not receive approval from the SEC.
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