Coinbase Tokenized Stocks Come to Base for 24-Hour Trading and Use as DeFi Collateral

Tokenized U.S. stocks issued by Coinbase launched on August 24 local time on Base, a layer-2 network that processes Ethereum transactions at lower cost. The names disclosed at launch were four: Apple, NVIDIA, Meta and Alphabet. Eligible non-U.S. users can hold the tokens in self-custody wallets and trade them 24 hours a day regardless of traditional stock market hours. Each token is backed one-to-one by actual shares held at a regulated custodian, and holders have a direct, senior claim on the underlying shares, Coinbase explained. When an institutional authorized participant (AP) buys the actual shares and places them into a bankruptcy-remote custody structure supervised under the Abu Dhabi Global Market (ADGM) framework of Alpaca, a regulated broker and custodian, Coinbase issues the corresponding tokens. The primary redemption process in the opposite direction is likewise available only to institutional partners and authorized participants that have completed know-your-customer (KYC) checks, and Coinbase described this as the same issuance and redemption model used by exchange-traded funds (ETFs) and American depositary receipts (ADRs). Ordinary users can buy and sell the tokens on Base decentralized exchanges that use the automated market maker (AMM) approach, which sets prices by putting the ratio of assets held in a liquidity pool into a formula, for example Aerodrome. The tokens are issued under the B20 specification, an extension of the Ethereum standard ERC-20, making them compatible with existing wallets and DeFi protocols, and after issuance they can be transferred without separate wallet whitelisting or platform lock-in. Coinbase did state, however, that it applies continuous sanctions screening to all transfers and can freeze or seize assets at the wallet level where regulations require it. These tokenized stocks can be used as collateral in DeFi lending markets such as Aave. Chainlink data feeds combine the underlying share price with a multiplier provided by Coinbase to continuously supply a reference price that DeFi protocols can use for purposes such as collateral valuation. Dividends and stock splits are both handled through a single on-chain multiplier. That is, dividends are reflected in the multiplier as if reinvested after deducting withholding taxes and fees, and in a split the number of shares represented by one token is adjusted without changing the number of tokens recorded on the blockchain. The product is offered under Regulation S, the U.S. securities law provision governing offshore issuance, so users in the United States and in certain restricted jurisdictions cannot access it.