SEC Opens Tokenized Stock Trading…Who Will Win First, Robinhood or Coinbase?

▲ SEC Opens Tokenized Stock Trading…Who Will Win First, Robinhood or Coinbase?/AI-generated image

As the U.S. Securities and Exchange Commission (SEC) temporarily allowed some virtual asset companies to trade tokenized stocks, Robinhood Markets (HOOD) and Coinbase Global (COIN) have entered a competition to capture the new growth market. While the tokenized traditional asset market is projected to grow to approximately $2.3 trillion by 2030, both companies are leveraging their own blockchains, but show different strengths in business scale and regulatory compliance.

According to investment media The Motley Fool on September 29 (local time), the SEC granted a five-year exemption to the virtual asset industry on the 17th, allowing some exchanges to trade tokenized versions of stocks. Tokenization is a method of combining asset ownership records with tokens stored on a blockchain, offering advantages such as 24-hour trading and significantly faster settlement compared to traditional stock trading. Consulting firm Oliver Wyman projected that the tokenized traditional asset market, currently valued at approximately $40 billion, will expand to about $2.3 trillion by 2030. The value of tradable tokenized stocks reached $3.2 billion as of September 28, a significant increase from $368.5 million a year ago.

Robinhood currently leads in business scale. Through its own blockchain, Robinhood Chain, launched in July, Robinhood has issued 301 tokenized stocks, with these assets valued at $148.8 million as of September 28. The company takes approximately 89% of virtual asset trading fees as revenue, recording $35.6 million in fee revenue from September 1-28 alone. However, Robinhood's stock tokens are in the form of debt securities without voting rights, raising questions about their full compliance with the SEC's new framework. CEO Vlad Tenev announced plans to provide redemption for actual shares and shareholder voting rights in the future.

Coinbase lags in scale but is evaluated to have a product structure closer to the SEC's new regulations. Coinbase has issued $8.4 million worth of stock tokens on its own blockchain, Base, and has been offering them to non-U.S. customers since August. These tokens are backed by actual shares held by a U.S. regulated broker and can already be redeemed for underlying shares. CEO Brian Armstrong also stated that shareholder voting rights will be supported in the future. The media's analysis suggests that Coinbase could gain a first-mover advantage if Robinhood's regulatory response is delayed.

However, Coinbase also has technical issues to resolve. The Coinbase exchange executes trades using an order book system similar to traditional stock exchanges, but the SEC's new framework is designed around Automated Market Makers (AMM). Consequently, Coinbase may need to build a new trading system or connect trades to AMM-based applications operating on Base. There is also a significant difference in fee volume. Fees collected by Base until September 28 amounted to only $4.3 million, significantly lower than Robinhood Chain's $35.6 million during the same period.

The Motley Fool assessed that while the tokenization market is still in its early stages, large players with experience in both traditional finance and virtual asset markets have a relative advantage. This is because tokenization requires not only blockchain technology but also significant administrative work for regulatory compliance and asset custody. Currently, Robinhood has secured more tokenized stocks and higher chain fee revenue, while Coinbase has strengths in its real stock-backed redemption structure and regulatory compliance. Ultimately, as the SEC's five-year exemption opens growth opportunities for the tokenized stock market, how quickly each company resolves its remaining regulatory and technical challenges will be a key variable in future competition.

*Disclaimer: This article is for investment reference purposes, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*