Coinbase Eyes Expansion into Traditional Brokerage with SEC Approval for Tokenized Stock Trading

Coinbase, the leading cryptocurrency exchange, is seeking approval from the U.S. Securities and Exchange Commission (SEC) to launch tokenized stock trading, a move that could expand its business into the territory of traditional brokerage firms. The crypto exchange's chief legal officer, Paul Grewal, told Reuters that Coinbase aims to offer digital versions of stocks known as tokenized equities, which would trade on blockchain networks rather than through conventional exchanges.

The model could allow round-the-clock trading, reduce transaction costs, and eliminate clearing intermediaries. However, the road ahead depends on how the SEC responds. Coinbase is looking to secure either a no-action letter or an exemption from enforcement, both of which would provide regulatory cover for offering these products in the U.S.

The push marks a strategic shift for Coinbase, which already owns a broker-dealer license through a dormant affiliate. If the initiative succeeds, it could position the company alongside retail brokerages like Robinhood (HOOD) and Charles Schwab (SCHW), which cater to a similar investor base, as well as crypto exchange Kraken.

While tokenized equities are not yet legal to trade in the U.S., platforms like Kraken are piloting such offerings overseas. Coinbase's timing aligns with a friendlier regulatory climate under new SEC chair Paul Atkins, who has dropped several crypto-related lawsuits and set up a task force dedicated to digital assets.

Grewal declined to say whether Coinbase had formally filed its request, noting that the confidence that comes from clear SEC guidance has been missing. "Exciting? Yes. Important? Absolutely. But breaking news? Not exactly. We've been saying since earlier this year that the SEC should enable markets to unlock tokenized securities," Grewal posted on social media.

"Tokenized debt, equity, and investment funds present an opportunity for tailored regulation for securities that are offered and traded via digitally native methods," he added. With this move, Coinbase is poised to become a major player in the traditional brokerage industry and further solidify its position as a leading player in the cryptocurrency space.