As the US SEC pushes for an “innovation exemption” framework for tokenization, Coinbase has come out firmly against issuer approval or consent requirements for third-party tokenized securities.
The US SEC categorized tokenized securities into two categories in its January guidance. These are issuer-sponsored and third-party sponsored tokenized securities, flagging risks related to secondary-market portability.
Coinbase Says Third-Party Tokenized Securities Should Not Require Issuer Approval
Crypto exchange Coinbase urges the US SEC to permit both issuer and third-party tokenization of publicly traded securities, per a written input.
It claims that forcing third parties to obtain issuer permission before creating blockchain versions of traditional securities would violate longstanding U.S. securities law principles and stifle innovation in capital markets. It also contradicts decades of SEC precedent that prohibit issuer-imposed restrictions on secondary market portability.
Scott Bauguess, VP of Global Regulatory Policy at Coinbase, said third‑party tokenization does not create a new security and preserves full shareholder rights. It means conditioning tokenization on issuer consent would improperly grant issuers veto authority over lawful secondary market transfers.
Coinbase highlighted recent SEC actions such as Nasdaq’s tokenized securities trading approval and the DTCC Tokenization Services pilot. It added that the issuer consent requirement is inconsistent with established regulatory logic and potentially anticompetitive.
SEC Innovation Exemption for Tokenization
With massive demand from TradFi to bring stocks, bonds, and treasuries on-chain, the SEC plans a tokenization innovation exemption framework. It allows temporarily issued tokens and trade tokenized securities without full registration.
The US SEC Chair Paul Atkins confirmed tokenization innovation exemption is coming in the next few weeks. The House Financial Services Committee also agreed on tokenization as the future of capital markets.
TradFi institutions are increasingly interested in tokenization amid a regulatory push. Notably, NYSE has also teamed up with Securitize to develop its tokenized securities platform.
Coinbase claims that issuer consent limits innovation exemption, which could risk pushing tokenization offshore. Coinbase’s position aligns with a broader industry push for open, permissionless-style tokenized securities.