Coinbase is reportedly seeking approval from the U.S. Securities and Exchange Commission (SEC) to offer its customers tokenized equities, a move that could revolutionize stock trading and pit the cryptocurrency exchange against traditional brokerages.

According to a recent report, Coinbase's Chief Legal Officer, Paul Grewal, stated that the company is in talks with the SEC and is awaiting the green light to provide access to "tokenized equities" by leveraging blockchain technology. This initiative marks a significant step for Coinbase as it looks to expand its offerings beyond cryptocurrencies and tap into the growing institutional demand for real-world assets (RWAs).

Tokenized equities involve converting a company's shares into digital tokens on a blockchain, similar to those used in cryptocurrencies. These tokens represent ownership of the underlying shares and can be traded on blockchain-based platforms. The potential benefits of tokenized equities include reduced trading costs, faster settlement times, and round-the-clock trading, all of which are attractive to both retail and institutional investors.

If approved, Coinbase's platform would allow users to buy and trade shares issued and settled directly on the blockchain, bypassing traditional exchange infrastructure. This could lead to greater efficiency and accessibility in the stock market, potentially attracting a new wave of investors.

Grewal has described the development as a "huge opportunity" that is likely to expand Coinbase's reach into new markets. He also noted that tokenized equities have become a "top priority" for the crypto exchange, as they would allow users to gain exposure to the U.S. financial markets without directly purchasing or meeting the requirements to buy the stock. Instead, users would hold tokenized versions of these assets.

Coinbase's pursuit of tokenized equities comes at a time when the regulatory landscape for cryptocurrencies and blockchain technology is evolving. While the SEC has previously taken a strict stance on crypto-related offerings, there are signs of a more favorable approach towards the sector.

However, the path to offering tokenized equities in the U.S. is not without its challenges. The U.S. currently lacks a formal market for trading tokenized equities, and the SEC has yet to provide clear guidance on the regulatory framework for these assets. Overcoming these hurdles will be crucial for Coinbase to realize its vision of bringing tokenized equities to the U.S. market.