Coinbase Seeks Regulatory Clarity for Tokenized Stocks
On Tuesday, Paul Grewal, the Chief Legal Officer of the American cryptocurrency exchange Coinbase, told Reuters that the company is striving for regulatory clarity in order to introduce tokenized stocks to the U.S. market. If approved, this would enable the exchange to offer blockchain-based trading of traditional stocks, competing with brokers such as Robinhood and Charles Schwab.
Tokenization of stocks refers to the process of converting company shares into digital tokens, similar to the trading of cryptocurrencies. Investors do not directly hold the securities, but rather hold tokens that represent ownership of those securities. Compared to traditional infrastructure, tokenized stocks promise faster settlement speeds, round-the-clock trading, and lower costs.
Grewal stated that this initiative is a “top priority,” with Coinbase seeking a no-action letter or exemption from the U.S. Securities and Exchange Commission (SEC). Such documents would indicate that SEC staff would not take enforcement action against the exchange’s introduction of tokenized stocks. Grewal noted that regulatory uncertainty has been a significant barrier to the widespread adoption of blockchain securities trading.
In May of this year, Coinbase’s competitor Kraken announced that it would offer a tokenized stock product, 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 round-the-clock trading.
As early as 2021, during its S1 filing, Coinbase attempted to issue a tokenized version of its own stock (ticker symbol COIN), but ultimately did not receive approval from the SEC.
Source: Related article: “Conversation with VanEck Investment Manager: Altcoins are Still Severely Overvalued, Future Trends Lie in Tokenized Equity.”