Coinbase is actively seeking approval from the U.S. Securities and Exchange Commission (SEC) to introduce 'tokenized equities,' which would enable stock trading through blockchain technology.

The company's Chief Legal Officer, Grewal, emphasized that obtaining a 'no action letter' from the SEC is a top priority, as it would allow Coinbase to proceed without facing regulatory enforcement actions.

Currently, tokenized equities are not available for trading in the U.S., although rival exchange Kraken has begun launching U.S. equity tokens, known as xStocks, in select international markets.

If approved, tokenized stocks would allow for the trading of traditional equities in a digital format, promising benefits such as faster settlement times, reduced costs, and the ability to trade 24/7.

Proponents of tokenized equities argue that they could lower trading costs and enhance settlement speeds, while critics raise concerns about low liquidity in secondary markets and the lack of global standards.

Coinbase's foray into tokenized equities could create a new revenue stream by merging traditional brokerage services with decentralized finance (DeFi), although regulatory acceptance remains uncertain.

This initiative is part of Coinbase's broader strategy to diversify its revenue streams and foster institutional adoption, following recent partnerships and product launches, including a credit card powered by American Express.

The political and regulatory landscape for Coinbase has improved since the Trump administration took office, as evidenced by the SEC dropping a prior lawsuit against the company.

Under the new SEC chair, Paul Atkins, there has been a shift towards a more favorable regulatory environment for cryptocurrencies, including the establishment of a task force for digital assets.

While Grewal did not confirm whether a formal request has been submitted to the SEC or provide a timeline for the rollout of tokenized stocks, he highlighted the need for regulatory clarity to attract institutional interest.

As the process for Coinbase to obtain SEC approval is complex, especially since it is not currently registered as a broker-dealer, the company faces significant regulatory hurdles.