Coinbase seeks US SEC approval to offer blockchain-based stock trading
- Coinbase is seeking the green light from the US SEC to offer its customers tokenized equities.
- The approval could put Coinbase in direct competition with retail brokerages like Robinhood and Charles Schwab.
- Tokenized equities have the potential to reduce trading costs, facilitate faster settlement and support round-the-clock trading.
- The COIN shares edge lower on Tuesday, reflecting broader concerns about geopolitical tensions in the Middle East.
Coinbase Global (COIN) is seeking approval from the United States (US) Securities and Exchange Commission (SEC) to offer tokenized equities to its customers, according to a Reuters report, citing Paul Grewal, the company's chief legal officer (CLO).
Coinbase eyes tokenized blockchain equities
Coinbase's interest in blockchain-based stock trading comes at a time when institutional demand for real-world assets (RWAs) is steadily growing.
If Coinbase's request is approved, the platform will expand its offerings to include stock trading, supported on blockchain. In other words, customers will have round-the-clock access to tokenized equities trading while benefiting from reduced transaction costs and faster settlement.
Grewal termed the development a "huge opportunity," likely to expand Coinbase's reach into new markets.
Tokenizing equities involves converting a company's shares into a digital token similar to those used in cryptocurrencies. Tokenized equities enable investors to hold digital tokens that represent ownership of securities.
The US currently has no tokenized equities, with critics of the idea calling for extensive research to address existing gaps before the SEC grants its approval. However, Kraken, a US-based exchange, is experimenting with similar products called xStocks, which launched in May.
The World Economic Forum highlights inadequate secondary-market liquidity, along with the lack of clear global standards, as key challenges for the adoption of tokenized equities.
The process of obtaining approval from the SEC is quite lengthy, considering Coinbase is not registered as a broker-dealer with the regulator. Coinbase was sued by the SEC during the administration of former US President Joe Biden. Still, the agency dropped the case this year amid the shift to clearer regulations championed by the administration of President Donald Trump.
If approved, Coinbase will receive a no-action letter from the SEC detailing that the regulatory will not object to particular offerings. The SEC will also agree not to recommend enforcement if Coinbase proceeds with the offerings.
"With a no action letter, an issuer of a tokenized equity or a platform that wishes to offer secondary trading in those equities can have some confidence, some comfort, that the SEC has adopted its view of why this product is compliant," Grewal said.
Coinbase's interest in tokenized equities offerings comes amid a major shift in the US to formulate clear regulations for cryptocurrencies. The stablecoin bill, referred to as the Guidance and Establishing Innovation for US Stablecoins (GENIUS) Act, recently advanced in the Senate ahead of a final vote anticipated this week.
Cryptocurrency prices FAQs
Token launches influence demand and adoption among market participants. Listings on crypto exchanges deepen the liquidity for an asset and add new participants to an asset’s network. This is typically bullish for a digital asset.
A hack is an event in which an attacker captures a large volume of the asset from a DeFi bridge or hot wallet of an exchange or any other crypto platform via exploits, bugs or other methods. The exploiter then transfers these tokens out of the exchange platforms to ultimately sell or swap the assets for other cryptocurrencies or stablecoins. Such events often involve an en masse panic triggering a sell-off in the affected assets.
Macroeconomic events like the US Federal Reserve’s decision on interest rates influence crypto assets mainly through the direct impact they have on the US Dollar. An increase in interest rate typically negatively influences Bitcoin and altcoin prices, and vice versa. If the US Dollar index declines, risk assets and associated leverage for trading gets cheaper, in turn driving crypto prices higher.
Halvings are typically considered bullish events as they slash the block reward in half for miners, constricting the supply of the asset. At consistent demand if the supply reduces, the asset’s price climbs.
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