Coinbase Seeks SEC Approval for Blockchain-Based Stock Trading

Coinbase, a leading cryptocurrency exchange, has made a notable move by seeking approval from the U.S. Securities and Exchange Commission (SEC) to issue blockchain-based stock. This initiative, if approved, would enable Coinbase to offer stock trading through blockchain technology, placing it in direct competition with traditional retail brokerages. The move highlights Coinbase's ambition to integrate blockchain technology into mainstream financial services, potentially transforming how stocks are traded and managed.

The proposal, if granted, would allow Coinbase to list and trade shares of the Bitwise Bitcoin and Ethereum ETF (Exchange-Traded Fund) under NYSE Arca Rule 8.201-E. This rule governs the listing and trading of commodity-based trust shares on the exchange. The investment objective of the Trust is to provide exposure to the value of bitcoin and ether held by the Trust, less the expenses of the Trust's operations and other liabilities. The Trust will hold bitcoin and ether and establish its net asset value at the end of every business day by reference to the CME CF Bitcoin—New York Variant for its bitcoin holdings and to the CME CF Ether—Dollar Reference Rate—New York Variant for its ether holdings. The Trust's assets will consist solely of bitcoin, ether, and cash, and it will create and redeem shares in cash with authorized participants on an ongoing basis in one or more blocks of 10,000 shares.

The SEC is currently reviewing the proposal and has instituted proceedings to determine whether to approve or disapprove the proposed rule change. The Commission is seeking comments from interested persons on whether the proposal is consistent with Section 6(b)(5) of the Act, which requires that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest. The Commission is also considering whether the proposal raises any new or novel concerns not previously contemplated by the Commission.

This move by Coinbase to seek SEC approval for blockchain-based stock trading is part of a broader trend in the cryptocurrency industry to integrate blockchain technology into traditional financial services. If successful, this initiative could pave the way for other companies to follow suit, potentially leading to a more decentralized and transparent financial system. However, it also raises important regulatory and legal questions that will need to be addressed by the SEC and other regulatory bodies. The outcome of this proposal will be closely watched by industry participants and regulators alike, as it could have significant implications for the future of stock trading and the role of blockchain technology in the financial industry.