U.S.-based cryptocurrency exchange Coinbase has filed for regulatory approval from the U.S. Securities and Exchange Commission (SEC) to offer tokenized stock trading.
SEC Approval Request
Coinbase's Chief Legal Officer Paul Grewal confirmed in a statement to Reuters that the company has filed with the SEC to offer 'tokenized shares' to its customers.
Advantages of Tokenized Stocks
Tokenized stocks are created by converting traditional company shares into digital tokens. Investors do not own shares directly but rather tokens representing those shares. Advocates argue this approach could reduce transaction costs, enable instantaneous transactions, and allow 24/7 trading.
Criticism and Challenges
Critics point out that significant challenges need to be addressed before these digital assets become mainstream. The World Economic Forum noted hurdles such as a lack of liquidity in secondary markets and absence of global standards. Currently, tokenized stocks are not legally tradeable in the U.S., although some crypto companies have started experimenting in this area.
Coinbase is looking to get licensed to trade tokenized stocks; however, significant barriers remain. It is still uncertain how the SEC will respond to this application and what steps will be taken moving forward.
