Key Insights:
- Coinbase aims to offer blockchain-based tokenized equities.
- SEC approval could create a 24/7 stock market with lower costs.
- This move could put Coinbase in direct competition with brokers.
Coinbase has approached the U.S. Securities and Exchange Commission (SEC) to gain approval for offering tokenized equities. If granted, the approval would allow the exchange to list tokenized shares and bonds on a blockchain, creating a faster, round-the-clock market.
According to company officials, the firm aims to secure a “no action letter” or exemptive relief to move forward without facing enforcement action. The strategy marks a pivot to position Coinbase as a central player in the next phase of digital finance.
Coinbase Seeks SEC’s Green Light for Tokenized Stocks
Coinbase has already submitted the SEC proposal to list tokenized equities, as claimed by the chief legal officer of the exchange, Paul Grewal. Grewal said in an interview with one media outlet that this initiative is among the top priorities of the exchange since it aims to give its users access to securities that are linked to blockchain.
The idea of tokenized equities is to turn the shares of companies into digital tokens following the same principle as cryptocurrencies. Advocates believe that the invention might enhance market efficiency, accelerate settlements, and reduce the costs of transactions. Tokenized stocks have not yet been listed in the U.S., and various challenges, such as the absence of secondary-market fungibility and explicit international standards, still exist.
Regulatory Approval and the SEC’s Stance
To continue the offering of its tokenized stock, Coinbase will have to get the SEC’s approval, which can be granted either by a “no action letter” or via exemptive relief. A “no action letter” would confirm that the SEC will not take enforcement action if Coinbase proceeds with its plans. Additionally, the SEC must assess whether tokenized stocks meet the requirements set by existing securities regulations.
Coinbase’s application to list its stock comes at a time when the government’s stance on the crypto industry is becoming more favorable. In 2023, under President Biden’s administration, the SEC filed a lawsuit against Coinbase, claiming it was operating as an unregistered broker-dealer. However, this case was dropped under the current administration.
Opportunities and Challenges of Tokenized Equities
Although presently, tokenized equities are very promising, there are still some obstacles. Among the key problems marked by specialists, the matter of liquidity on secondary markets should be noted. The World Economic Forum has mentioned that this is a considerable challenge to mass adoption because there is no well-developed market for tokenized stocks.
Also, the lack of uniform universal global regulation adds to the complications of things, and the integration of such assets into the mainstream financial system could take a long time.
The proponents of blockchain-powered stock may help reduce the costs of transactions and assist with more rapid and efficient settlement. Unlike traditional stock markets, tokenized stocks would allow for 24/7 trading, with no downtime.
Disclaimer
This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.
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