US Regulator Paves a Limited Path for Stocks on Blockchain: Why 3 Companies Could Stand Out
According to analysts, the SEC’s limited window for tokenized U.S. shares could position Coinbase, Robinhood, and Circle as early leaders.
The U.S. Securities and Exchange Commission’s (SEC) five-year innovation exemption has established a framework that could allow tokenized shares to trade on public blockchains. Goldman Sachs and Citizens analysts noted that Coinbase (COIN), Robinhood (HOOD), and Circle (CRCL) could benefit from this development through various channels.
The new structure mandates that tokens preserve core shareholder rights, such as dividends and voting rights. Trading platforms are restricted in terms of trading volume and the number of shares they can offer. Additionally, companies can object to third parties trading tokenized versions of their own shares.
Coinbase Stands Out with Its Infrastructure
Goldman Sachs highlighted features of Coinbase’s existing tokenized share product that align with the SEC framework. The exchange’s tokenized share product offers dividend and shareholder rights tied to the underlying stock. Coinbase CEO Brian Armstrong also announced that voting rights would be added soon.
The company’s institutional custody service and its Coinbase Tokenize platform, which helps other firms migrate assets to the blockchain, were also cited as potential advantages. Citizens analysts further highlighted Coinbase’s stablecoin activities, its Ethereum-based Base network, and its tokenized asset infrastructure.
However, there is a technical compliance issue for Coinbase regarding the operation of a direct trading platform. While existing exchanges use a central limit order book, the SEC’s framework is based on transactions occurring via automated market makers (AMMs). Coinbase may need to build new infrastructure or route trades to AMM-based decentralized exchanges on Base.
Robinhood Needs to Develop a Compliant Product in the US
Robinhood’s existing stock tokens outside the U.S. offer investors exposure to share prices but do not grant all the ownership rights of the underlying stock. Consequently, the company needs to perform additional development to offer a product in the U.S. that complies with the SEC framework.
Robinhood CEO Vlad Tenev stated that features such as share redemption and voting rights would be added to stock tokens. Citizens analysts believe the company could adapt quickly to the new structure due to interest in its non-U.S. products and its Arbitrum-based Robinhood Chain initiative.
USDC Opportunity for Circle
The rise in tokenized security transactions could also increase demand for tokenized cash used in on-chain markets. Goldman Sachs and Citizens noted that Circle’s USDC could be utilized in settlement, collateral, and other market transactions. Coinbase could also benefit indirectly from this development through its connection to USDC and its distribution activities.
Traditional exchanges like Nasdaq and Intercontinental Exchange appear to face a more limited impact for now. Trading limits, issuers’ right to object, and the constraints of AMMs in high-volume markets make it difficult for new platforms to pull significant trading volume away from existing exchanges in the short term.