In brief

• Bank of America analysts highlighted Coinbase’s tokenization product while upgrading COIN.
• They wagered that the company could debut a token for Base, if legislation is passed.
• However, they also warned that Binance’s U.S. affiliate could stifle Coinbase’s growth.

Bank of America analysts upgraded Coinbase to “Buy” from “Neutral” on Thursday, describing the exchange as a leader in tokenization that stands to benefit from its own blockchain network.

Without changing their price target of $340 per share, the bank’s analysts wrote in a note that the exchange’s outlook improved following its debut of several products last month. Stock trading and predication markets are among those that could broaden revenue, they wrote.

Still, as asset managers grow increasingly interested in issuing digital representations of securities like exchange-traded funds, the analysts argued that Coinbase is in a unique position compared to its competitors, highlighting a non-consumer-facing product.

Last month, Coinbase unveiled Coinbase Tokenize, a product that simultaneously provides asset managers with “issuance, custody, compliance, and access to its sizable client base,” according to the analysts. Given that Coinbase has a large base of institutional and retail clients, they wagered that Coinbase is well-positioned to “create markets and distribute products.”

Coinbase’s vision for tokenization has largely revolved around stocks and ETFs, but the analysts highlighted real estate and private companies as other growth areas. Although the product does not seem to tap Coinbase’s tokenization offering for institutions, JPMorgan announced in November that its deposit token is coming to Base.

Coinbase shares recently changed hands around $248, a 1% increase on the day, according to Yahoo Finance. In their note, the analysts acknowledged that the stock is around 40% off its July high of $444, but they wrote that the exchange’s “product velocity” is increasing.

In 2023, Coinbase introduced an Ethereum layer-2 scaling network called Base, which it has steadily embraced as a way to expand into blockchain infrastructure. For example, the network underpins its Bitcoin-backed lending product, as well as Coinbase’s Base app.

If a native currency debuts for Base, then the exchange itself would likely benefit, the analysts wrote, describing the token’s debut as an effective windfall for the crypto exchange. They noted, however, that the token would primarily serve as a way to incentivize builders, creators, and early adopters to use the network, while boosting its decentralization.