How Coinbase Wants Base to Become the Backend for Tokenized Finance

Coinbase stocks: On Monday, Coinbase debuted its own tokenized U.S. equities on its Layer-2 network Base. Unlike many other tokenized equity standards in the market, each token represents a direct claim on a real share and passes through the underlying stock’s economic benefits and, where applicable, shareholder rights. The tokens are issued by Coinbase Onchain SPV, an entity regulated by Abu Dhabi's ADGM, with brokerage infrastructure provider Alpaca serving as broker and custodian.

• Why it matters: Coinbase is the latest retail trading platform to launch its own standard for tokenized equities, following its competitors Kraken, Binance, and Robinhood. Together with crypto-native issuers such as Ondo, these firms have pushed the sector from ~$130 million in tokenized value twelve months ago to an all-time high of $2.9 billion today.

Expansion: Tokenized equities bring platforms like Coinbase closer to an "everything exchange," a single venue for trading and holding virtually any form of value. Tokenization also eases international expansion: instead of rebuilding brokerage and market infrastructure country by country, Coinbase can use the same underlying rails across multiple jurisdictions. And for firms such as Coinbase and Robinhood that are launching these products on their own networks, more assets also mean more activity, which translates into additional revenue through transaction fees.

Onchain finance AWS: For Coinbase, the ambition goes further and follows a familiar playbook. As with its custody business or Developer Platform, Coinbase builds infrastructure for its own products first, then opens the stack to others. Tokenized equities appear to be on the same path, potentially becoming rails that other brokerages and neobanks plug into. A brokerage, for example, could let clients tokenize stocks on Base and access lending and other DeFi products without building any of it itself.

• “We want to be that backend so that, if you are a financial platform, you can integrate one platform and get access to every single financial product with best execution at the lowest cost, delivering better financial experiences to your customers,” Jesse Pollak, Head of Base, said on a podcast.

Tokenized portfolios: Early examples of such products include Automated Token Portfolios (ATPs), launched on Tuesday by digital asset manager Bitwise together with onchain startup Glider. The product lets Bitwise build different thematic portfolios based on Coinbase's tokenized stocks. Unlike in a traditional index fund, investors do not receive a fund share. They hold the individual stocks in their self-custodial wallet — with weights automatically rebalanced by Glider — and can use those stocks elsewhere onchain, such as for lending or as collateral.

Portfolio-backed lending: Similar to Kraken’s Flexline offering, Base is also working on infrastructure that could allow users to borrow stablecoins against their entire tokenized equity portfolio rather than individual assets.

• “A lot of the work I’m doing right now with the Coinbase teams is around portfolio line-of-credit infrastructure, so you can have all of those assets sit in your portfolio and borrow 30% or 40% against it,” Pollak said.

Outlook: While it is still unclear when portfolio-backed lending and other more sophisticated features will go live, Coinbase's more immediate priority is to expand its stock lineup. Nvidia, Meta, Apple, and Alphabet are live today, with names including Amazon, Microsoft, Tesla, and Circle set to follow. But listings alone will not establish Coinbase’s offering. It also needs developers to build products around the assets and give users reasons to hold and use them on Base.

• “Ticker count is a vanity number. The metric I actually watch is whether builders are shipping real products on top of the ones we've already listed. That's the signal for whether this becomes infrastructure or just stays a headline,” Xen Baynham-Herd, Head of Marketing & Global Expansion at Base, told Blockstories.

Mark Hull is a core contributor to Kamino, Solana’s leading lending platform. Roughly 30% of all tokenized equities deployed across DeFi are currently deployed on Kamino.

Lending is pitched as the flagship use case for tokenized equities. Yet their traction as collateral has trailed their growth as an asset. Why is that?

First, the yield profile of tokenized equities does not align well with the lending strategies that have historically attracted the most crypto-native capital. One of the biggest has been looping, essentially a leveraged carry trade around yielding RWAs such as Figure’s tokenized home equity lines of credit (HELOCs) or OnRe’s tokenized reinsurance, which gives investors exposure to returns generated from underwriting real-world insurance risk. Stocks lack that natural carry. Meanwhile, users seeking leveraged directional exposure have generally preferred more volatile assets such as SOL.

Second, the infrastructure around tokenized equities is still early. Pricing outside market hours remains difficult, while corporate actions introduce additional risk. A stock split, for example, requires oracle pricing and secondary markets to correctly reflect the new share ratio, or the token can be mispriced as collateral. Those unknowns have pushed lending markets toward conservative LTVs and caps, making stocks less capital-efficient as collateral.

Both constraints should ease over time. As the infrastructure around tokenized equities matures, integrating them safely into fintech front ends should become easier, opening the door to margin lending and other credit use cases for a much broader user base.

Brian Huang is co-founder of Glider, an onchain portfolio management platform. Previously, he was a high-frequency trader at XTX Markets, one of the world’s largest electronic market makers.

AMMs dominate crypto trading and currently also tokenized-equity trading. Why, and will that remain the case?

AMMs dominate today largely because launching an onchain liquidity pool is faster and easier than building professional market-making infrastructure. For platforms such as Coinbase and Robinhood, there is also an adverse economic incentive: AMMs generate more transactions, and therefore more fee revenue, for their own blockchains than alternative trading models.

But AMMs have structural weaknesses: they commingle retail and sophisticated traders into the same liquidity. Retail loses the pricing advantage it could receive when its less-informed flow is segregated from that of hedge funds. AMMs also require liquidity to be pre-positioned onchain, limiting the trade sizes they can support compared to traditional equity markets.

This is why issuers are increasingly converging on the Request for Quote (RFQ) model first established by Ondo for tokenized equities. There, an app sends an order to the issuer, who routes it to a market maker that sources the stock on traditional stock exchanges before minting the corresponding token. This market structure allows tokenized equities to tap into the deep liquidity of traditional exchanges like Nasdaq.

But even RFQs are likely only an intermediate step. Large orders leak information before execution and market makers can even reject them. Over time, I expect tokenized-equity trading to move closer to TradFi market structures, with dark pools and single-dealer platforms streaming prices directly to apps and institutions.

Synchronization of both the frontend and the backend
Illustration: Blockstories