Coinbase Pursues SEC Approval for Blockchain Solutions

Coinbase is making strides to expand its offerings by seeking approval from the U.S. Securities and Exchange Commission (SEC) to provide “tokenised equities” to its customers. This innovative move could enable the cryptocurrency exchange to facilitate stock trading through blockchain technology, positioning it as a competitor to established retail brokerages like Robinhood and Charles Schwab. Paul Grewal, Coinbase’s chief legal officer, emphasized that this initiative is a significant priority for the company.

Understanding Tokenised Equities

Tokenised equities represent a transformative approach to stock trading, where shares of a company are converted into digital tokens. This method allows investors to hold tokens that signify ownership of the underlying securities, rather than possessing the securities directly. Advocates of tokenised equities argue that this system could lead to reduced trading costs, quicker settlement times, and the possibility of trading around the clock. However, the concept is not without its challenges. Critics highlight several issues that need resolution before tokenised equities can gain widespread acceptance. A recent report from the World Economic Forum pointed out the lack of sufficient secondary-market liquidity and the absence of a clear global standard as significant hurdles to the adoption of this trading model.

Regulatory Hurdles and SEC Approval

For Coinbase to offer tokenised equities in the United States, it must secure either a “no action letter” or exemptive relief from the SEC. A no-action letter would indicate that the SEC does not intend to pursue enforcement actions against Coinbase for proceeding with its plans. Typically, companies engaged in securities trading must register as broker-dealers. Coinbase faced legal challenges from the SEC in 2023, which alleged that the company was operating as a broker-dealer without proper registration. However, this case was dropped earlier this year under the Trump administration. Although Coinbase acquired a broker-dealer in 2018, this affiliate has not been active in providing trading services.

Industry Context and Competitive Landscape

Currently, tokenised equities are not available for trading in the U.S., but other firms are exploring this concept. For instance, rival crypto exchange Kraken announced plans to launch tokens of U.S. equities, branded as xStocks, which will be accessible in select international markets. The competitive landscape is evolving, and Coinbase’s potential entry into the tokenised equities market could reshape how retail investors engage with stock trading. Grewal did not disclose whether Coinbase has formally requested SEC approval or when it anticipates launching this new product.

Implications for the Future of Cryptocurrency

The push for tokenised equities comes amid a broader shift in U.S. cryptocurrency policy, particularly under the Trump administration, which has sought to foster a more favorable environment for the industry. Trump has appointed regulators who are seen as friendly to cryptocurrency and has engaged with industry leaders to discuss regulatory frameworks. This shift has positively impacted the cryptocurrency market, with Bitcoin reaching record highs this year. The SEC has also re-evaluated its stance, dropping lawsuits against several crypto companies, including Coinbase, Binance, and Kraken, while establishing a task force to develop new regulations for digital assets. Grewal noted that a no-action letter would provide reassurance to companies looking to enter the tokenised equity space, potentially accelerating institutional adoption of cryptocurrency and blockchain technology.

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