Coinbase wins Abu Dhabi license to offer tokenized securities, but with caveats

Coinbase has secured regulatory approval from the Abu Dhabi Global Market [ADGM] to establish an international tokenization hub for tokenized securities in the ADGM, as it races to bring traditional securities on chain.

It will be able to organize deals and custody digital securities, but it has not shared plans on the launch date, supported tokenized equities, or from which jurisdictions the investors will enter.

Coinbase expands tokenized securities to Abu Dhabi

The Financial Services Regulatory Authority [FSRA] granted Coinbase Financial Services Permission for its planned tokenized-securities business.

The Financial Services Regulatory Authority [FSRA] awarded Coinbase Financial Services Permission for the proposed Tokenized-securities business.

Coinbase will make shares issued and registered in ADGM backed 100% physically, with changes of ownership through crypto wallets and not through brokerage accounts.

Verified holders may be eligible to receive economic and governance rights relating to the underlying securities, though the rights will be conditional.

Transactions will be screened for sanctions, and Coinbase will retain the right to freeze/seize assets at wallet level should circumstances ever demand it.

Brett Tejpaul, co-CEO of Coinbase Institutional, said:

No major financial center has yet built a framework that treats tokenized equities simultaneously as securities, blockchain-native tokens, and DeFi-composable assets.

The Abu Dhabi hub will target tokenized securities and on-chain capital markets while Coinbase continues to operate its separate Dubai operation that focuses on global derivatives.

What the Coinbase license does not reveal

Several important details remain undisclosed.

Coinbase has not identified the equities it intends to tokenize, the blockchain supporting them, launch timing, fees, or eligible jurisdictions.

Its disclosures also place conditions on some shareholder rights.

Only holders satisfying defined vesting requirements can exercise voting and redemption rights. Dividends will be automatically reinvested rather than distributed directly.

Transactions that only concern digital securities will not need a brokerage or bank account. Participants eligible to receive redemption proceeds must make sure they have a suitable account.

There is also the question of Coinbase’s stated goal for integration with DeFi offerings.

Even though it can be tokenized on-chain, Coinbase is exploring DeFi which does have regulatory checks at transfer, sanction screening, and at the wallet level to protect the protocol.

In some respects the license points the way to a permissive market for tokenized assets, although without actually showing exactly how open or accessible that market will be in practice

Final Summary

• The FSRA has authorized Coinbase to arrange deals and provide custody for tokenized securities in ADGM.
• Nothing is known yet about launch timing, eligible markets, and the extent of DeFi integration.