Armstrong Says Real Securities Should Sit Behind Stock Tokens
Coinbase CEO Brian Armstrong is drawing a sharper distinction between tokenized stocks backed by real securities and products that merely recreate stock-price exposure through derivatives or debt instruments, as competition over how equities move onchain intensifies.
Armstrong said Monday that Coinbase has established what he considers the appropriate model for tokenized equities: securities fully backed by real underlying shares, with redemption rights, integrated dividends and voting rights expected to follow.
The comments go beyond a routine promotion of Coinbase’s recently launched stock tokens. They amount to an argument over what investors should actually own when a company says it has put a stock on a blockchain.
That distinction has become increasingly important as tokenized equities expand from a relatively small crypto niche into a broader competition involving crypto exchanges, brokerages and traditional market operators.
Coinbase’s structure uses actual underlying shares rather than simply creating a contract that follows their market price. Its tokenized stocks are issued on Base under the B20 token standard, with each token backed 1:1 by an underlying security held through regulated custody in a bankruptcy-remote structure.
Coinbase initially launched tokenized versions of Nvidia, Apple, Meta Platforms and Alphabet shares in August for eligible investors outside the United States. The products are offered under Regulation S and are unavailable to U.S. persons and customers in other restricted jurisdictions.
The securities are issued through Coinbase’s Abu Dhabi-based tokenization structure, which operates under Financial Services Regulatory Authority oversight in Abu Dhabi Global Market. Coinbase describes the token as providing a direct economic claim on the corresponding underlying equity rather than synthetic price exposure.
There are, however, qualifications to Armstrong’s description of the tokens as redeemable for underlying shares.
Coinbase’s product documentation says primary creation and redemption are limited to KYC-onboarded institutional partners and authorized participants. Separately, its offering documents distinguish between “vested” and “unvested” token holders. Certain redemption and voting rights are available only after a holder satisfies the applicable verification and eligibility requirements.
A vested holder seeking redemption can also need an appropriate brokerage or bank account capable of receiving the resulting assets or proceeds. Geographic restrictions, sanctions screening, anti-money laundering checks and other compliance conditions continue to apply.
In other words, possessing a Coinbase stock token in a wallet does not automatically give every holder an unconditional ability to demand delivery of a conventional share.
Dividend treatment is also different from simply receiving an ordinary cash dividend into a brokerage account. Coinbase says cash distributions received on the underlying securities are generally reinvested after applicable withholding taxes and fees. The economic benefit is reflected through an onchain multiplier rather than by increasing the holder’s raw token count.
Voting rights carry another qualification. Armstrong said they are coming, while Coinbase’s disclosures provide for eligible vested holders to exercise certain voting rights through the tokenization structure. The holder is not necessarily recorded directly on Apple, Nvidia or another underlying company’s shareholder register in the same manner as someone holding conventional registered shares.
Those details matter because there is no single tokenized-stock structure across the industry.
Kraken’s xStocks, for example, are also backed 1:1 by underlying equities held in custody, but Kraken explicitly says they do not give holders voting rights or a legal claim on the underlying company shares. The economic benefit of dividends is instead reflected through additional token value or balances.
Robinhood goes further in the synthetic direction. Its European stock tokens are tokenized debt securities that provide economic exposure to underlying stocks and ETFs but do not give the holder legal or beneficial rights against the companies whose shares they track.
Crypto exchanges are experimenting with still more structures. Binance has been building several different stock-trading wrappers, ranging from direct securities ownership to physically settled options, tokenized products and equity perpetual futures.
Its recent BYD and Lenovo perpetuals, for example, provide leveraged exposure to the companies without giving traders ownership of the underlying shares. OKX has similarly expanded equity-linked derivatives, while Gate has moved deeper into traditional markets through U.S. stock options.
The regulatory framework is beginning to recognize these differences as well. In January, the U.S. Securities and Exchange Commission divided tokenized securities broadly between securities tokenized by or on behalf of the original issuer and products created by unaffiliated third parties.
Coinbase falls into the latter category for stocks such as Apple and Nvidia. Coinbase holds real shares behind its tokens, but Apple and Nvidia themselves did not issue the blockchain tokens.
That question is becoming more relevant as established market operators prepare for tokenized trading. Cboe has already expanded language in its market-data framework to cover decentralized and tokenized venues, another sign that the infrastructure surrounding onchain securities is moving closer to conventional capital markets.
Armstrong Is Really Starting a Fight Over What “Ownership” Should Mean
The interesting part of Armstrong’s argument is that “tokenized stock” is becoming too broad a term.
A token backed by an actual Nvidia share, a debt security that tracks Nvidia, a perpetual future linked to Nvidia and a genuine Nvidia share recorded directly onchain can all give an investor roughly the same directional price exposure.
But economically and legally, they are very different products.
That difference barely matters when the only question is whether Nvidia rises 3% tomorrow. It matters enormously when the company pays a dividend, shareholders vote, an intermediary fails, a token has to be redeemed or regulators decide who actually owns what.
Coinbase is betting that investors will eventually demand more than price tracking. Armstrong’s preferred model tries to preserve the useful parts of a share — real asset backing, economic distributions and shareholder rights — while adding blockchain features such as self-custody, 24/7 transferability and DeFi composability.
That is a stronger proposition than a purely synthetic token. But Coinbase should be careful about making the distinction sound cleaner than it is.
The underlying share is real, but the relationship between the token holder and the company remains intermediated by Coinbase’s issuing structure and custody arrangement. Legal title generally sits within the trust structure rather than putting the wallet holder directly onto the underlying company’s shareholder register.
Galaxy Digital has highlighted precisely this issue. Its own tokenized GLXY shares are issuer-sponsored SEC-registered common stock. They carry the same legal and economic rights as conventionally held Galaxy shares because Galaxy itself recognizes them as its equity.
That is arguably a purer form of tokenized stock than a third-party wrapper. The problem is scalability. Coinbase can tokenize multiple companies without waiting for Apple, Nvidia, Meta or Alphabet to redesign their shareholder infrastructure. An issuer-sponsored model requires cooperation from each company.
That may become the industry’s fundamental trade-off: legal purity versus distribution speed.
The market is already large enough for the argument to matter. Crypto platforms increasingly want to become all-purpose trading venues, while traditional exchanges are exploring blockchain settlement and around-the-clock markets. The winner will not necessarily be the company that lists the most stock tokens first.
It could be the structure investors, regulators and eventually stock issuers trust most.
Armstrong is effectively trying to establish the minimum standard before that market becomes much larger: if a platform calls something a tokenized stock, there should be an identifiable real security behind it and a credible path for the economic rights of that security to reach the token holder.
That is a sensible line to draw.
But the next argument is harder: whether a claim on a real share held through a third-party structure is eventually good enough, or whether tokenization ultimately moves toward actual issuer-recognized shares living directly onchain.
If the latter model wins, today’s wrappers — even fully backed ones — may turn out to be the bridge rather than the destination.
Johan Shamshad is a financial markets writer at Dave Finances covering cryptocurrencies, trading platforms, brokers, fintech, financial regulation, and developments across global markets. He previously worked at Gulf News, adding newsroom experience to his coverage of fast-moving financial and digital-asset markets.
His work focuses on identifying market-moving events, company developments, regulatory changes, product launches, and shifts in trading and financial infrastructure.
Johan contributes news and analysis designed to help readers understand not only what happened, but why a development matters and how it may affect the wider financial landscape.