Coinbase (COIN) is looking to break into stock trading by asking the U.S. Securities and Exchange Commission (SEC) for permission to offer “tokenized equities,” which are digital tokens that represent shares of companies, according to Reuters. This would allow customers to trade stocks using blockchain technology, similar to how cryptocurrencies are traded. If approved, it could bring Coinbase into direct competition with traditional online brokerages like Robinhood (HOOD) and open a brand-new business opportunity for the crypto exchange.
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Interestingly, Coinbase’s Chief Legal Officer, Paul Grewal, said that launching tokenized equities is a “huge priority” for the company. Supporters of the idea say that it could lower trading costs, offer faster settlement, and allow 24/7 stock trading. However, critics point to challenges like low liquidity in secondary markets and the absence of clear global rules. Nevertheless, in order to move forward in the U.S., Coinbase would need either a no-action letter or exemptive relief from the SEC saying that the agency won’t take legal action against the company.
It is worth noting that tokenized equities aren’t currently allowed in the U.S., but other companies are testing them abroad. Indeed, rival crypto exchange Kraken recently announced plans to launch “xStocks,” which are tokenized versions of companies like Apple (AAPL) and Tesla (TSLA), for users outside the U.S. It has also launched commission-free stock trading in parts of the U.S. and plans to expand globally.
Is COIN Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on COIN stock based on 12 Buys, 11 Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average COIN price target of $264.67 per share implies 3.7% upside potential.
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