Coinbase Brings Stocks into DeFi: Shares Can Now Be Used as Collateral

Original author: Xiaobing

On August 25, Coinbase announced the official launch of tokenized stock products on its Base chain. The first four listings are the largest tech giants by US market cap: Nvidia (NVDAc), Apple (AAPLc), Meta (METAc), and Alphabet (GOOGLc).

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

This isn't the first crypto company to offer tokenized stocks. Ondo Finance currently holds roughly $1 billion in market share, and Kraken's xStocks and Binance's bStocks are already live. But Coinbase's entry approach is different: From day one, it has directly integrated stock tokens into the DeFi infrastructure on the Base chain, enabling tokenized stocks not only to be traded but also used as collateral, for lending, providing liquidity, and entering portfolio strategies.

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

Product Structure

Coinbase's tokenized stocks are issued using the Base chain's proprietary B20 token standard, an extended version of ERC-20 designed specifically for stablecoins and real-world assets (RWAs).

Each token is backed 1:1 by the corresponding real stock held by regulated broker-dealer and custodian Alpaca, stored in a bankruptcy-remote structure under the Abu Dhabi Global Market (ADGM) regulatory framework. Token holders possess a direct beneficial claim on the underlying stock — not a derivative, not a synthetic price, not a CFD.

Several technical details are worth noting.

The B20 standard handles dividends and stock splits through on-chain multipliers, without changing token balances or interrupting DeFi positions. This solves a long-standing problem for tokenized stocks entering DeFi: If a stock is being used as collateral in Aave and suddenly announces a split or dividend, what happens to the token balance? B20's design allows the multiplier to adjust automatically, requiring no action from the user.

Tokens can be freely transferred between wallets after issuance, with no whitelist required and no per-transaction approvals.

Restrictions on US users are implemented at the application layer (Coinbase's app interface blocks US IPs and accounts), not at the token contract level. This means B20 tokens behave as freely as any ERC-20 token on the Base chain.

Chainlink has been selected as the official oracle, providing continuous pricing data for NVDAc, AAPLc, METAc, and GOOGLc. This is a prerequisite for DeFi protocols to integrate stock tokens into lending pools, liquidation engines, and automated strategies — without a reliable on-chain price source, these protocols won't dare to integrate.

Who's Using It, and How?

The list of DeFi integrations live on day one is already quite comprehensive:

Aerodrome provides AMM liquidity pools for tokenized stocks, allowing users to market-make with USDC and stock tokens.

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

0x, 1inch, KyberSwap, and CoW Swap offer aggregator trading routes.

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

This means a non-US user can complete the following chain of operations: Buy tokenized Nvidia stock on Coinbase, transfer it to a self-custody wallet, deposit it on Aave as collateral, borrow USDC, and use the borrowed USDC for other trades on Aerodrome — all available 24/7, without going through any traditional broker.

This chain is what Coinbase is really selling. 24-hour trading is just the surface-level appeal; the deeper value proposition is that stocks have become programmable DeFi primitives. They can be composed, split, collateralized, and routed on-chain just like ETH or USDC. Once stocks possess this composability, they are no longer just a passive asset to "hold and wait for price movements," but rather an active asset that can flow between multiple protocols to generate yield.

Competitive Landscape

The tokenized stock track is heating up rapidly.

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

Ondo Finance is currently the largest player, holding approximately $1 billion of the roughly $3 billion market. Kraken's xStocks and Binance's bStocks follow closely behind. Although Coinbase is a late entrant, its differentiation lies in two structural advantages.

First is the DeFi ecosystem of the Base chain. Ondo's tokenized stocks can be held and traded, but they don't match the DeFi composability that Coinbase achieved by integrating with Aave and Aerodrome from day one.

Second is Coinbase's brand and compliance credibility as the largest publicly traded US crypto exchange. The combination of the ADGM regulatory framework, Alpaca custody, and Chainlink oracles carries a level of credibility with institutional investors that pure crypto-native projects simply don't have.

But Coinbase also faces a clear limitation: The product is not available to US users. This is a hard constraint under the Regulation S framework. Coinbase's core user base and largest revenue source are in the US, yet US users can't access this tokenized stock product.

The Real Questions

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

Is liquidity deep enough? The trading depth of tokenized Nvidia stock on Aerodrome is several orders of magnitude shallower than the liquidity of real NVDA on Nasdaq. If slippage is too high, professional traders won't use it. If market makers aren't willing to provide sufficient quotes, Aave won't set attractive collateral ratios. Liquidity is the hardest cold-start problem.

Is the liquidation mechanism reliable? Using ETH as collateral on Aave to borrow USDC has been battle-tested through years of market cycles. But what about using NVDAc as collateral? The underlying tokenized stock is real stock held in regulated custody — in the event of extreme market conditions requiring liquidation, can the on-chain liquidation engine keep up? If Alpaca's custody fails or the ADGM framework changes, would the 1:1 relationship between token and underlying asset break? These tail risks are invisible during normal market conditions, but they could be fatal under stress testing.

How long will the regulatory arbitrage window stay open? Coinbase used Regulation S to bypass US securities registration requirements, obtaining compliance approval in Abu Dhabi through the ADGM framework. This path is currently viable, but the SEC's stance on tokenized securities is not yet fully clear. If the SEC ultimately determines that these products constitute indirect penetration into the US market (for example, US users accessing via VPN or non-KYC wallets), the compliance framework could face challenges.

Coinbase positions this launch as part of its "Everything Exchange" strategy. Jesse Pollak put it bluntly: "Not just trading assets, but exchanging value."

In plain terms: Coinbase wants Base to become an on-chain financial operating system where everything can be bought, sold, collateralized, and composed. Tokenized stocks are the key piece of this vision — if US stocks can be brought on-chain, what can't be?