Coinbase is seeking SEC approval to offer tokenized equities, allowing stock trading through blockchain technology.
Tokenized equities are digital tokens representing shares in a company, traded similarly to cryptocurrencies.
Supporters believe tokenized equities could reduce trading costs and enable 24/7 trading, while critics cite concerns over liquidity and global standards.
In the U.S., tokenized equities are not currently traded, but some firms are testing the model internationally.
To offer tokenized equities in the U.S., Coinbase would need a 'no action letter' or exemptive relief from the SEC.
Coinbase is not registered as a broker-dealer and faced a previous lawsuit from the SEC in 2023 for acting as one without registration.
Regulatory uncertainty has slowed institutional interest in blockchain-based financial products, according to Coinbase's Chief Legal Officer.
The SEC has not publicly commented on Coinbase's request for offering tokenized equities.
If approved, Coinbase's entry into tokenized stock trading could lead to competition with platforms like Robinhood and Charles Schwab.
Grewal mentioned that the initiative is a 'huge priority' for Coinbase.
Coinbase's aim with tokenized equities is to provide more accessible and innovative trading options for investors.
Kraken, another exchange, plans to offer U.S. equity tokens, called xStocks, outside the U.S.
The lack of regulatory clarity poses a challenge for the launch timing of tokenized equities and institutional interest in blockchain-based financial products.
Coinbase's effort to offer tokenized equities showcases its strategic move towards expanding its business offerings.
The SEC's decision on Coinbase's request could impact the future landscape of stock trading and blockchain-based financial products.
Coinbase aims to leverage blockchain technology to revolutionize stock trading services if granted SEC approval.