Coinbase Pursues SEC Approval for Blockchain-Based Equities

By: Isha Das

Coinbase, a leading cryptocurrency exchange, is in pursuit of approval from the U.S. Securities and Exchange Commission (SEC) to launch blockchain-based equities. This initiative, if approved, would enable Coinbase to offer digital tokens that represent ownership in publicly listed companies, effectively integrating traditional equity markets with blockchain technology. Such a move could usher in a new frontier for financial markets, potentially placing Coinbase head-to-head with well-established retail brokers like Robinhood and Charles Schwab.

The company's Chief Legal Officer, Paul Grewal, emphasized that the endeavor is deemed a "huge priority." Coinbase seeks regulatory relief in the form of a "no action letter," signaling the SEC's non-opposition to their planned operations under the current securities framework. The proposed product involves tokenized equities, which are digital representations of stocks traded on a blockchain. This streamlined approach is known for reducing transaction costs, accelerating settlement times, and facilitating 24/7 trading.

Notwithstanding their potential benefits, tokenized equities remain largely experimental in the U.S. due to existing regulatory ambiguities and the absence of widespread liquidity in secondary markets. While Grewal did not specify whether Coinbase has formally filed a request with the SEC, the aspiration is that a clearer regulatory stance could pave the way for substantive institutional interest in tokenized financial assets.

Coinbase is not solitary in its ambition; crypto rival Kraken announced its plan to introduce a similar offering in select jurisdictions outside the U.S., branded as xStocks. However, U.S.-based digital asset companies currently offer analogous services predominantly to non-U.S. residents. Presently, the climate under President Donald Trump's administration appears more accommodating for crypto enterprises, with multiple lawsuits against major exchanges having been retracted. Additionally, the SEC has constituted a specialized task force dedicated to formulating contemporary guidelines for digital assets. For Coinbase, expanding into the realm of tokenized equities signifies not only a potential revenue stream but also an opportunity to fuse traditional brokerage services with decentralized finance.