Written by: Xiaobing

On August 25, Coinbase announced the official launch of tokenized stock products on its Base chain. The first four stocks listed are the largest tech giants in the U.S. stock market: NVIDIA (NVDAc), Apple (AAPLc), Meta (METAc), and Alphabet (GOOGLc).

Base founder Jesse Pollak stated that the goal is to expand the number of listings to "thousands" in the future.

This is not the first crypto company to offer tokenized stocks. Ondo Finance currently holds about $1 billion in market share, while Kraken's xStocks and Binance's bStocks are also live. However, Coinbase's approach this time is different: it has directly integrated stock tokens into the DeFi infrastructure on the Base chain from day one, enabling tokenized stocks to be not only traded but also used as collateral, lent, provide liquidity, and participate in composable strategies.

In other words: NVIDIA's stock can now be used as collateral to borrow stablecoins on Aave.

Product Structure

Coinbase's tokenized stocks are issued using the self-developed B20 token standard on the Base chain, which is an extended version of ERC-20, specifically designed for stablecoins and real-world assets.

Each token is held 1:1 by regulated broker and custodian Alpaca, corresponding to the real stocks, stored in a bankruptcy-isolated structure under the regulatory framework of the Abu Dhabi Global Market (ADGM). Users holding the tokens have direct beneficial claims to the underlying stocks; they are not derivatives, not price synthetic, and not CFDs.

Several technical details are worth noting.

The dividend and stock split handling mechanism of the B20 standard is achieved through an on-chain multiplier that does not change the token balance and does not interrupt DeFi positions. This resolves an old issue when tokenized stocks enter DeFi: if a stock is used as collateral on Aave and suddenly announces a stock split or dividend, what happens to the token balance? The design of B20 is to automatically adjust the multiplier without requiring any action from users.

Tokens can be freely transferred between wallets after issuance, without whitelisting or individual approvals.

The restrictions for U.S. users are implemented at the application layer (Coinbase's app interface will block U.S. IPs and accounts), not at the token contract layer. This means the behavior of B20 tokens on the Base chain is as free as any ERC-20 token.

Chainlink has been chosen as the official oracle to provide continuous pricing data for NVDAc, AAPLc, METAc, and GOOGlc. This is a prerequisite for DeFi protocols to incorporate stock tokens into lending pools, liquidation engines, and automated strategies; without a reliable on-chain price source, these protocols would not dare to onboard them.

Who is Using It, How is It Used?

The DeFi integration list launched on the first day is already quite comprehensive:

Aerodrome offers AMM liquidity pools for tokenized stocks, where users can market make with USDC and stock tokens.

Aave supports using tokenized stocks as collateral for lending. Morpho and Euler also plan to integrate lending functionalities.

0x, 1inch, KyberSwap, and CoW Swap provide aggregated trading routes.

LI.FI and Jumper support cross-chain transfers and exchanges.

This means a non-U.S. user can complete the following operational chain: purchase tokenized stocks of NVIDIA on Coinbase, transfer them to a self-custody wallet, deposit them as collateral on Aave, borrow USDC, and use the borrowed USDC for other transactions on Aerodrome, all 24/7, without going through any traditional brokerage.

This chain is what Coinbase genuinely aims to sell; 24-hour trading is merely a superficial selling point, while the deeper selling point is: stocks have become programmable DeFi primitives. They can be composed, split, collateralized, and routed on-chain like ETH or USDC. Once stocks attain this composability, they are no longer just a passive asset of "holding and waiting for market fluctuations," but have transformed into an active asset that can flow between multiple protocols to generate returns.

Competitive Landscape

The tokenized stock sector is heating up rapidly.

According to RWA.xyz data, the total market value of tokenized stocks has reached approximately $2.48 billion, growing 5.2% over the past 30 days, with monthly transfer volume hitting $27.28 billion and over 2.1 million holders. Citibank predicts that the market size for tokenized securities could reach $5.5 trillion by 2030.

Ondo Finance is currently the largest player, holding about $1 billion in a market of roughly $3 billion. Kraken's xStocks and Binance's bStocks follow closely behind. Although Coinbase is late to the game, it differentiates itself with two structural advantages.

The first is the DeFi ecosystem of the Base chain. Ondo's tokenized stocks can be held and traded, but in terms of DeFi composability, they do not match Coinbase's depth of integration with Aave and Aerodrome from day one.

The second is Coinbase's brand and compliance backing as the largest publicly listed crypto exchange in the U.S. The combination of the ADGM regulatory framework, Alpaca custody, and Chainlink oracle carries a level of credibility in the eyes of institutional investors that does not compare with purely crypto-native projects.

However, Coinbase also faces a significant limitation: the product is not open to U.S. users. This is a hard constraint of the Regulation S framework. Coinbase's core user base and largest source of revenue are in the U.S., and for this product, U.S. users cannot utilize it.

The Real Issues

For tokenized stocks to become a meaningful asset class in DeFi, three questions need to be answered.

Is the liquidity deep enough? The trading depth of tokenized NVIDIA stocks on Aerodrome is several orders of magnitude below that of real NVDA on NASDAQ. If the slippage is too large, professional traders will not participate. If market makers are unwilling to provide sufficient quotes, Aave will not set attractive collateral rates either. Liquidity is the hardest problem in cold-start situations.

Is the liquidation mechanism reliable? The logic for liquidating ETH collateral for USDC on Aave has been validated through years of practical experience. But what about using NVDAc as collateral? The underlying of tokenized stocks is real stocks held in regulated custody; if extreme market conditions require liquidation, can the on-chain liquidation engine keep up? If there are issues with Alpaca custody or changes in the ADGM framework, will the 1:1 relationship between tokens and underlying assets break? These tail risks are invisible in normal conditions but could be fatal under stress testing.

How long can the window for regulatory arbitrage remain open? Coinbase has used Regulation S to bypass U.S. securities law registration requirements, obtaining compliance through the ADGM framework in Abu Dhabi. This path is currently feasible; however, the SEC's stance on tokenized securities has not yet fully clarified. If the SEC ultimately determines that such products constitute indirect infiltration into the U.S. market (for example, U.S. users accessing them through VPNs or non-KYC wallets), the compliance framework could face challenges.

Coinbase positions this launch as part of its "Everything Exchange" strategy. Jesse Pollak states it plainly: "It's not just about trading assets, but about exchanging value."

In simpler terms: Coinbase wants Base to become an on-chain financial operating system where anything can be bought and sold, anything can be collateralized, and anything can be composed. Tokenized stocks are a key piece of this vision; if U.S. stocks can be put on-chain, what else cannot?