A five-year pilot program for tokenized U.S. stocks has been cleared by the SEC, and two Wall Street firms now say three crypto companies could be the early winners of the initiative.
According to analysts at Goldman Sachs and Citizens, cryptocurrency companies Coinbase (COIN), Robinhood (HOOD) and Circle (CRCL) are ready to benefit from the new exemption. The program allows tokenized U.S. stocks, once they meet the requirements, to trade through automated market makers on public blockchains, with the SEC setting trading limits and how many stocks each venue can offer.
Experts point to several areas where the market holds promise, including custody, tokenization infrastructure and stablecoin settlement. They add that the exemption grants brokers the space to build out onchain offerings.
What the SEC’s exemption actually does
The heart of this narrative is the SEC’s five-year innovation exemption, which opens the door for tokenized U.S. stocks to trade using automated market makers, or AMMs, on public blockchains.
For a token to be eligible, it has to uphold shareholder rights including dividends and voting. There are also limits on trading volume and on the number of stocks a venue can offer.
The exclusion is deliberately limited in scope. It allows issuers to raise an objection before third-party tokenized versions of their shares can start trading.
The exemption applies only to tokenized U.S. stocks, and it grants issuers the authority to object before third-party tokenized versions of their shares can start trading.
Coinbase’s existing playbook
The analysts at Goldman Sachs believe Coinbase stands to benefit across multiple parts of its business. The firm’s existing tokenized-equity offering already possesses many of the features the SEC requires, including shareholder rights and dividends that are comparable with the underlying stock.
Coinbase CEO Brian Armstrong also said earlier this week that voting rights are “coming soon,” a key piece in giving token holders the same rights as investors in the underlying shares.
Other than the core trading platform, the company runs an institutional custody business and Coinbase Tokenize, which offers infrastructure for firms that want to put assets onchain.
Citizens analysts flagged Coinbase’s influence across custody, tokenized assets, stablecoins, and its Ethereum-based blockchain Base.
The AMM hurdle
One barrier stands in the way of Coinbase running its own trading venue under the exemption: its exchanges rely on central limit order books, whereas the SEC framework is built around automated market makers.
Coinbase would require fresh infrastructure, or it could reroute activity through decentralized exchanges that are built around automated market makers, such as protocols running on Base.
Robinhood’s compliance question
The SEC framework makes it difficult for Robinhood to fit its current offshore stock token products inside it, since those offerings grant only price exposure to U.S. shares through a derivative, rather than conveying the full ownership rights required under the exemption. Still, Robinhood could gain from the matter, even though its current offshore stock tokens do not fit the SEC framework.
Analysts at Goldman said that Robinhood would need further product development before it could offer a compliant version in the U.S.
This month, a dispute erupted over AMC Entertainment’s CEO criticizing Robinhood for offering AMC-linked stock tokens without the company’s approval. The SEC recently introduced a new approach that grants companies the authority to challenge third-party tokenized versions of their shares before those tokens can start trading.
Citizens analysts believe Robinhood will act quickly, driven by the traction of its tokenized-equity offering outside the U.S. and its broader push around its Arbitrum-based Robinhood Chain.
This week, Robinhood CEO Vlad Tenev signaled that he’s moving ahead with further enhancements to the stock tokens, including share redemptions and voting rights.
Circle’s settlement role
As more securities are issued as tokens, there could be more demand for tokenized forms of cash.
Both Goldman and Citizens reports flagged Circle as an indirect beneficiary, with USDC serving as a settlement currency, collateral and other instrument in onchain markets. Coinbase stands to profit alongside it, thanks to its direct exposure to the asset and its close ties to USDC, which it also helps distribute.
Why traditional exchanges look safe
For the moment, traditional exchanges like Nasdaq (NDAQ) and NYSE owner Intercontinental Exchange (ICE) seem to be at less risk.
The new trading platforms are unlikely to take meaningful volume from their established rivals, according to Goldman, because of trading caps, the number of issuers who have opted out, and the limits of AMMs in deeper markets.
The analysts add that trading limits, issuer exceptions and technical restrictions are expected to safeguard traditional exchanges from major competition.
The tokenization infrastructure race
The SEC has generated new openings in custody, tokenization infrastructure and stablecoin settlement. Brokers, according to analysts, now have room to grow their onchain offerings.
Coinbase’s Tokenize operation already gives other firms the means to put assets onchain, while its institutional custody business adds yet another layer.
For Robinhood to make its stock tokens compliant, they would need to add shareholder rights and additional features.
What happens next
Analysts are already naming Coinbase, Robinhood and Circle as potential beneficiaries if more U.S. securities move onchain, even though the SEC’s tokenized-stock experiment is narrow for now.
According to the analysts, Coinbase stands as the clearest winner, thanks to its current tokenized-equity offerings and an established custody operation.
Robinhood’s offshore stock tokens will need to be brought into compliance, and Circle’s USDC could see increased demand for settlement and collateral.
This provision allows issuers to raise an objection before third parties can put tokenized versions of their shares into circulation under the SEC’s five-year innovation exemption.
Key facts box
- SEC’s five-year innovation exemption: tokenized U.S. stocks trade through AMMs on public blockchains
- Coinbase: existing tokenized-equity offering, institutional custody, Coinbase Tokenize, Ethereum-based blockchain Base
- Robinhood: offshore stock tokens, Arbitrum-based Robinhood Chain
- Circle: indirect beneficiary via USDC for settlement and collateral
- Nasdaq (NDAQ) and NYSE owner Intercontinental Exchange (ICE) appear less exposed for now
Coinbase, Robinhood and Circle are all in position to build new infrastructure, custody and settlement services as the SEC moves forward with tokenized stocks, and analysts see them as the early winners.
Source material: “Coinbase, Robinhood, Circle could be early winners of SEC's tokenized-stock push, analysts say,” CoinDesk.
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