Last week, Coinbase (NASDAQ:COIN) sought approval from the Securities and Exchange Commission for issuing tokenized equities. This essentially means that people would be able to hold and trade stocks in the form of cryptocurrency tokens, backed by Coinbase.
An approval from the SEC would likely cause many other exchanges to start issuing their own tokenized stocks. COIN stock could surge if this is approved, since tokenized stocks could be very popular for traders and investors.
If Coinbase’s request is approved, tens of millions of users on its platform would be able to buy and sell conventional stocks in the form of blockchain-based tokens. It would also set the precedent for other exchanges to allow their users to do the same.
Tokenized stocks aren’t a new concept, and they’ve been around for quite some time. Many smaller exchanges already offer them, and they are not permitted within the U.S. Allowing these tokens would make them very popular, since investors would be able to bypass many existing restrictions and trade 24/7.
If Coinbase does get approved, I expect the stock to surge. It is very likely that tokenized stocks would be very popular in the investment community and shift users away from “legacy” brokers into platforms like Coinbase.
Whether or not you should buy COIN stock now depends more on the likelihood of Coinbase’s request being approved. In my opinion, it’s quite likely.
The SEC has already opened the door conceptually, as it is weighing a “conditional exemption for tokenized securities.” Moreover, the current administration is friendly to cryptocurrencies. President Donald Trump and First Lady Melania Trump both have their own cryptocurrency projects.
The rest of the crypto market would have to cooperate for COIN stock to hold at higher levels, considering the consensus price target of $268.7 implies 12.9% downside risk. A SEC approval should still lead to a short-term rally.
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