Coinbase chief executive Brian Armstrong says tokenised shares should represent real securities, as the cryptocurrency exchange seeks to give investors outside the United States access to an American equity market worth more than $70 trillion.
Armstrong said Coinbase’s products are backed by underlying shares rather than synthetic assets or debt instruments. The shares are held through an offshore special-purpose company and a regulated US broker, while verified holders can request redemption. Dividend income is generally reinvested after taxes and fees.
The products are not available to US persons and have not been registered under the US Securities Act.
In a post on X, Armstrong said Coinbase had developed a model based on real shares, redemption rights and benefits linked to the underlying securities. Unlike products that merely follow a stock’s price, Coinbase’s tokens correspond to shares held in custody. Eligible holders can exchange them for the underlying shares, subject to the relevant regulatory process.
Coinbase has added dividend functionality and plans to introduce voting rights. Armstrong said those features, combined with onchain transfers, could provide access to the US stock market for overseas investors and institutions.
Coinbase launched its first Base-native stock tokens on 24 August for eligible non-US investors. The initial products tracked Apple, Nvidia, Meta and Alphabet under the AAPLc, NVDAc, METAc and GOOGLc tickers, using Base’s B20 token standard.
Authorised participants buy the relevant equities before they are placed in a segregated custody account. Coinbase describes each token as a direct claim on a real share, rather than simple exposure to its price.
The securities are issued by Coinbase Onchain SPV Ltd., incorporated in the Abu Dhabi Global Market. Prospectuses name Alpaca Securities as the broker and custodian responsible for buying, selling and holding the US equities.
Alpaca is registered with the US Securities and Exchange Commission and is a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. It holds the shares for the offshore issuing company, rather than opening a conventional brokerage account for each token holder.
Coinbase’s Nvidia prospectus describes each token as a proportional beneficial interest in a pool of deposited property. Legal title generally remains with the trust, meaning a wallet holder does not appear directly on Nvidia’s shareholder register. The shares are held in trust for eligible holders and, subject to Abu Dhabi Global Market law, would remain separate from the issuer’s assets if Coinbase Onchain SPV became bankrupt or insolvent.
Redemption and dividends
Verified users, called “vested holders” in Coinbase’s documents, may request redemption for the underlying stock, US dollars or a supported cryptocurrency such as USDC. The redemption fee is 0.05%.
Before processing a request, Coinbase, Alpaca and other service providers may check the holder’s identity, location, sanctions status and anti-money laundering information. Settlement and the sale of underlying shares can delay payment, and the value shown when a request is submitted is not guaranteed because market prices may change.
Tokens can be bought on decentralised exchanges without full verification. Those users are classed as unvested holders until they meet the required conditions. They may trade or transfer tokens in permitted markets, but cannot exercise redemption or voting rights, receive the underlying shares or submit voting instructions until their status is approved.
Cash dividends are generally reinvested instead of being paid directly to holders. The issuer buys additional shares and adjusts the deposit ratio, although taxes and fees reduce the amount reinvested. The Nvidia filing says non-US holders generally face 30% US withholding tax unless a treaty reduces it, while the issuer charges 5% of the gross value of dividends or other distributions.
Corporate actions, expenses and taxes can change the ratio, so one token may not always represent a full share. Vested holders can submit voting instructions, but the issuer’s ability to vote on their behalf depends on applicable law, available time and practical limitations.
Galaxy Research questioned Coinbase’s description of a token as “a real share that you actually own”. It said the structure uses a third-party wrapper, with the legal relationship running through the offshore special-purpose company rather than Apple, Nvidia, Meta or Alphabet. Galaxy found no evidence that those companies sponsored the tokens.
US restriction remains
The prospectuses state that the securities have not been registered under the Securities Act of 1933 or with US state regulators. They are offered offshore under Regulation S, and cannot be offered, sold or delivered in the US or for the account or benefit of a US person.
US customers can trade conventional shares and exchange-traded funds through Coinbase Capital Markets, a separate FINRA-member brokerage operation offering 24/5 trading, with Apex Clearing handling execution, custody and clearing.
The Securities and Exchange Commission has said placing a security on a blockchain does not remove it from federal securities law. Its guidance distinguishes issuer-sponsored products from tokens created by unrelated third parties, which may offer beneficial ownership, a securities entitlement or only economic exposure.
Despite the restriction, trading has increased. On 13 September, Base trading data showed daily decentralised-exchange volume in tokenised stocks had reached a record $100m. Token Terminal reported $730.9m in trading volume over the previous 30 days, including $557.1m on Aerodrome and $139.3m on Uniswap v4.
Coinbase later added products linked to Amazon, Microsoft, Strategy, SanDisk, Tesla and privately held SpaceX. Base’s B20 standard supports identity checks, transfer controls and other compliance restrictions across wallets and decentralised applications.
