Coinbase is aiming to obtain approval from the U.S. Securities and Exchange Commission (SEC) to offer tokenized stock trading, a step that could lead it into competition with traditional brokerage services.

The company’s chief legal officer, Paul Grewal, stated to Reuters that they intend to launch digital counterparts of stocks, termed tokenized equities, which would be traded on blockchain platforms rather than through established stock exchanges. This model could facilitate continuous trading, reduce transaction costs, and do away with intermediary clearing processes.

However, the success of this initiative largely hinges on the SEC’s response. Coinbase seeks a no-action letter or an exemption from enforcement to procure a regulatory shield for these offerings in the U.S.

This initiative represents a significant transition for Coinbase, which currently possesses a broker-dealer license through an inactive affiliate. Should this proposal succeed, it may position the firm alongside retail brokers like Robinhood and Charles Schwab, appealing to a similar demographic, as well as crypto exchange Kraken.

While tokenized equities are not eligible for trading in the U.S. yet, platforms like Kraken are currently testing such services internationally. The timing of Coinbase’s endeavor aligns with a more favorable regulatory environment under the leadership of new SEC chair Paul Atkins, who has discontinued several crypto-related lawsuits and established a task force dedicated to digital assets.

Nevertheless, Grewal refrained from confirming whether Coinbase has made a formal request to the SEC. According to him, the expectation of coherent SEC guidance has been absent.

“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.”

Translation: Tokenized debt, equity, and investment funds present an opportunity for tailored regulation for securities that are offered and traded via digitally native methods.