Coinbase seeks SEC greenlight to issue tokenized stocks

Coinbase reportedly seeks approval from the US Securities and Exchange Commission (SEC) to offer tokenized equities, digitized versions of traditional stocks, on its platform. If successful, the fund will expand the crypto exchange’s blockchain-based equity trading and pit it against hedge funds Robinhood and Charles Schwab.

Chief Legal Officer Paul Grewal confirmed the initiative in a Tuesday interview with Reuters, where he called tokenized equity trading a “huge priority” for Coinbase. 

The company hopes the SEC will grant a no-action letter or similar exemptive relief to provide the legal certainty needed to proceed without facing enforcement action.

Coinbase seeks SEC greenlight to issue tokenized stocks

Tokenized equities are digital representations of stocks that can be traded on blockchain platforms. They do not represent direct ownership in the traditional sense but act as proxy tokens embedded in real shares. 

Supporters argue that tokenized equities could help improve financial market activity by lowering costs, speeding up settlements, and allowing trading to occur outside of standard market hours.

However, naysayers and regulatory experts still see asset tokenization as a “questionable” venture. According to a recent World Economic Forum report, the absence of secondary market liquidity and a globally recognized regulatory standard could set the adoption of tokenized equities back.

Coinbase has also stepped up its crypto business activities, announcing a partnership with e-commerce platform Shopify last Thursday supporting stablecoin payments. The e-commerce firm, which allows merchants to build and operate their own online storefronts, said a pilot group of sellers will gain access to USDC payments by the end of June.

Speaking at a Coinbase-hosted event on Thursday, Shopify CEO Tobias Lütke, who also serves on Coinbase’s board, said: “In our own philosophical framework, we are extremely aligned with everything that crypto stands for.” 

US crypto law changes favor institutional competition

Coinbase is not currently registered as a broker-dealer, a legal status typically required for firms dealing in securities. The SEC previously sued Coinbase in 2023 under President Joe Biden’s administration, accusing it of operating an unregistered securities exchange. 

The lawsuit was dropped this year after President Donald Trump’s administration made several changes to the laws enacted during Biden’s tenure.

Trump’s administration has adopted a more crypto-friendly stance, withdrawing several regulatory actions initiated under former SEC Chair Gary Gensler and pledging to revise digital asset regulations. 

Since Trump took office in January, the SEC has ended enforcement actions against crypto firms, including Coinbase, Binance, and Kraken.

Although tokenized equities are not yet legal to trade within the United States, international markets are seemingly ready to welcome a change of the rule in the coming months. Rival exchange Kraken announced last month that it is launching xStocks, tokenized representations of US equities, for non-American users in select jurisdictions.

Coinbase is now hoping this new regulatory environment will improve its chances of obtaining the necessary approvals. Grewal reiterated that receiving a no-action letter would give firms “some confidence, some comfort, that the SEC has adopted its view of why this product is compliant.”

“It’s that confidence that has been lacking so far,” Grewal added, “and I think really held back a lot of the institutional adoption of crypto and blockchain technology.”

The CLO did not specify whether Coinbase has already submitted a formal request to the SEC, he indicated the company is engaged in active discussions.

The SEC said it no longer intends to pursue these rules and will only revisit them through a new proposal if it “chooses to address ESG disclosures again.” The development is part of changes made under the Trump administration, which has also rolled back climate-related disclosure mandates and curtailed the Commission’s defense of such rules in court.

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