The United States Securities and Exchange Commission (SEC) is reportedly preparing to issue an innovation exemption that would permit blockchain-based tokenized trading of public company stocks, extending to third-party tokens that track share prices even without the consent of the underlying companies. According to a report from Bloomberg on Monday, the exemption could come as early as this week, marking a significant shift in how equities are traded by expanding access beyond traditional stock exchanges into decentralized crypto platforms.
The SEC has engaged with hundreds of market participants over the past months to gather feedback on the appropriate regulatory framework for tokenized trading. Under the proposed rules, third-party tokens would need to offer the same benefits as common stock, such as voting rights and dividends, or risk being delisted. However, details have not yet been finalized and could change before the exemption is formally announced, sources familiar with the matter told Bloomberg. SEC Commissioner Hester Peirce, known for her pro-innovation stance on digital assets, has been leading the push for this innovation exemption.
Tokenization has attracted growing interest from Wall Street firms in recent years because it promises greater efficiencies in trading, settlement, and 24/7 market access compared to traditional systems. The New York Stock Exchange’s parent company, Intercontinental Exchange, announced in January that it would launch a tokenization platform for around-the-clock trading and settlement of stocks and exchange-traded funds using a blockchain-based post-trade system. That initiative is considered one of the largest developments in tokenization to date, signaling mainstream acceptance of distributed ledger technology in capital markets.
Bullish, the crypto exchange led by former NYSE president Tom Farley, has also strengthened its tokenization capabilities. Earlier this month, Bullish completed a $4.2 billion acquisition of Equiniti, a transfer agent platform, to enhance its ability to issue and manage tokenized securities. The deal underscores the growing convergence between traditional financial infrastructure and blockchain technology.
Proponents of tokenized stock trading argue that the technology can promote financial inclusion by enabling individuals without access to U.S. markets or traditional brokerage accounts to gain exposure to well-known public companies such as Nvidia (NVDA), Google (GOOGL), and Tesla (TSLA). By lowering barriers to entry, tokenized securities could democratize investment opportunities globally.
Despite the anticipated exemption, internal dissent exists within the SEC. Some officials reportedly do not support the decision to allow tokenized stock trading, citing concerns about investor protection and market integrity. The crypto industry has long advocated for clearer rules, and this exemption is seen as a step toward regulatory clarity. Cointelegraph reached out to the SEC for comment but did not receive an immediate response.
Industry Concerns and Pushback
While many in the crypto and fintech sectors have welcomed the news, not all stakeholders are on board. Brett Redfearn, president of Securitize—one of the largest crypto-native tokenization platforms—expressed concerns about the exemption. Redfearn argued that allowing third parties to tokenize stock without involving the issuer could lead to fragmentation issues and leave investors uncertain about the true value of their shares. He emphasized the importance of having the issuer at the table to ensure consistency and transparency.
Tokenization has also expanded into the pre-IPO space, enabling investors to gain exposure to private companies before they go public. However, some companies, including OpenAI and Anthropic, have publicly opposed unauthorized tokenized stocks that track their valuations. The SEC’s move could set a precedent that allows such tokens to exist even without company permission.
The timing of the SEC’s tokenization initiative coincides with recent legislative progress. The Senate Banking Committee advanced the CLARITY Act on Thursday, moving it toward a full Senate floor vote next month. The bill aims to provide a clear regulatory framework for digital assets, which many industry experts believe is necessary for full institutional adoption. Investor Kevin O'Leary, known from 'Shark Tank,' has stated that Wall Street firms will not fully embrace tokenization unless ownership issues are resolved and a framework like the CLARITY Act is in place.
Tokenized stock trading represents a paradigm shift in how securities are issued, traded, and settled. Blockchain technology allows for near-instantaneous settlement, reduced counterparty risk, and the potential for programmable features such as automated dividend payments. The SEC’s innovation exemption could accelerate the migration of traditional financial activities onto decentralized platforms, reshaping the landscape of global capital markets.
Market observers will be watching closely as the final details of the exemption emerge. The decision could influence how other regulators around the world approach tokenized securities, potentially creating a domino effect of similar exemptions in other jurisdictions. For now, the crypto and traditional finance communities are eagerly awaiting the official announcement, which could arrive within days.
Source: Cointelegraph News