SEC Exemption Paves Way for Crypto Industry Players to Tokenize Stocks

The US Securities and Exchange Commission (SEC) has introduced an innovation exemption for tokenized US stocks traded through automated market makers on public blockchains. This move could bring significant benefits to several major players in the crypto industry, including Coinbase, Robinhood, and Circle.

Goldman Sachs analysts believe that Coinbase's existing tokenized-equity offering already meets many of the SEC's requirements, with dividend features comparable to those of the underlying stock. Coinbase CEO Brian Armstrong has announced that voting rights will be added soon, closing the remaining gap.

However, one constraint remains: Coinbase's exchanges use central limit order books, which are not compatible with the SEC's framework, which requires AMM-based venues. Goldman noted that Coinbase would need to build new infrastructure or route trading through AMM-based decentralized exchanges to operate a compliant trading venue directly under the exemption.

Robinhood's current tokenized stock offering operates outside of the US and does not provide full ownership rights, as required by the SEC's exemption. Goldman said Robinhood would need further product development to bring a compliant version to the US market.