Coinbase Pushes Back Against SEC Issuer Consent Rules for Tokenized Securities

Quick overview

Coinbase is coming out swinging against the idea of needing issuer approval for third-party tokenized securities, just as the US Securities and Exchange Commission is about to let the cat out of the bag on its tokenization innovation exemption. All this is happening against the backdrop of institutional investors starting to get interested in bringing traditional assets like stocks and bonds onto blockchain networks.

Coinbase Tells SEC to Chill on Issuer Consent Requirement

Coinbase just sent a fairly clear message to the SEC in writing, saying let both issuer- and third-party-driven tokenization of publicly traded securities happen and don’t go messing it up with issuer consent requirements while you’re at it. They argue that mandating issuer consent would basically go against long-standing US securities law principles and makes it hard to move these securities around on the secondary market.

Scott Bauguess, Coinbase VP of Global Regulatory Policy, pointed out that third-party tokenization doesn’t actually create new securities and still leaves shareholding rights intact. Then he dropped a bombshell by saying that conditioning tokenization on issuer approval would basically give issuers the right to veto the transfers of securities as they see fit – not exactly what the SEC has been doing for decades.

Coinbase also has some backup for their argument, citing:

• Nasdaq just got the green light to start trading tokenized securities
• The DTCC just launched its Tokenization Services pilot to make settlement a whole lot smoother

The exchange says requiring issuer consent could really slow down innovation, limit market competition, and even drive tokenization efforts overseas where the regulatory climate is a lot more friendly.

SEC Plans to Bring the Heat with a Tokenization Exemption Framework

The SEC is working on a tokenization innovation exemption that lets the tokenized securities get issued and traded without full registration.

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Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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