Coinbase CEO Calls for Fully Backed Tokenized Stocks

Coinbase CEO Brian Armstrong said the exchange’s tokenized stocks are intended to represent actual securities, not synthetic derivatives. The company holds the underlying shares through an offshore special‑purpose vehicle and a regulated U.S. broker, allowing verified holders to redeem tokens for the underlying stock, cash or a supported stablecoin.

Structure and Custody

Each token is issued by Coinbase Onchain SPV Ltd., an entity incorporated in the Abu Dhabi Global Market. The SPV purchases the corresponding U.S. equities via Alpaca Securities, a broker‑dealer registered with the SEC and a member of FINRA and SIPC. The shares are placed in a segregated custody account and remain legal title of the trust, separate from the issuer’s assets.

Redemption and Fees

Verified ("vested") holders may request redemption for the underlying share, U.S. dollars, or a supported cryptocurrency such as USDC. A redemption fee of 0.05% applies, and compliance checks—including identity, location and AML screening—must be satisfied before processing. Redemption is not automatic for every wallet holder; unverified ("unvested") holders can trade the tokens but lack redemption or voting rights.

Dividends and Voting

Cash dividends received from the underlying companies are generally reinvested to purchase additional shares, adjusting the deposit ratio that each token represents. A 5% fee on gross dividend value is charged, and non‑U.S. holders are subject to a 30% U.S. withholding tax unless a treaty reduces the rate. Voting rights are indirect: vested holders can submit instructions to the issuer, which may vote the custodied shares on their behalf, subject to legal and practical constraints.

Regulatory Scope

The tokens are offered only to non‑U.S. persons under Regulation S, meaning they are not registered under the U.S. Securities Act of 1933. U.S. investors must use Coinbase Capital Markets, a separate FINRA‑member brokerage, for traditional stock trading.

Market Activity

Despite the U.S. restriction, trading volume has risen. On September 13, daily volume on Base‑based decentralized exchanges hit a record $100 million, and the past 30‑day volume reached $730.9 million, with most activity on Aerodrome and Uniswap v4. Coinbase initially launched tokens for Apple, Nvidia, Meta and Alphabet, later adding Amazon, Microsoft, Tesla, SpaceX and others.