The US Securities and Exchange Commission is reportedly preparing to introduce an “innovation exemption” that would permit blockchain-based tokenized trading of public company stocks. According to a report from Bloomberg, this exemption could be announced as early as this week, allowing these stocks to be traded on decentralized crypto platforms without requiring the consent of the companies whose shares are being tokenized.
The SEC has engaged with hundreds of market participants to refine the rules, which would require that third-party tokens carry the same benefits as common stock—such as voting rights and dividends. If they fail to meet these criteria, the tokens could face delisting. The exemption is being led by SEC Commissioner Hester Peirce, a known advocate for crypto innovation.
Background on Tokenized Stock Trading
Tokenization involves creating a digital representation of a real-world asset, such as a stock, on a blockchain. This process allows for near-instant settlement, 24/7 trading, and increased accessibility for investors who lack traditional brokerage accounts. Over the past few years, interest from Wall Street firms has surged as they recognize the potential for improved efficiency and lower costs compared to legacy systems.
In January, Intercontinental Exchange—parent company of the New York Stock Exchange—announced plans to launch a tokenization platform for round-the-clock trading and settlement of stocks and ETFs using a blockchain post-trade system. This marked one of the most significant developments in the space. Additionally, Bullish, a crypto exchange led by former NYSE president Tom Farley, recently strengthened its tokenization capabilities through its $4.2 billion acquisition of transfer agent platform Equiniti.
Proponents argue that tokenized stock trading can promote financial inclusion by enabling individuals outside the US or without access to standard brokerage accounts to invest in major companies such as Nvidia (NVDA), Google (GOOGL), and Tesla (TSLA).
Regulatory and Industry Reactions
Despite the expected exemption, several SEC officials reportedly do not support the decision. Concerns center around investor protection and the potential for market fragmentation. Brett Redfearn, president of Securitize—a leading crypto-native tokenization platform—has publicly pushed back against the exemption. He warned that enabling third-party tokenization “without an issuer at the table” could create confusion over share values and lead to a fragmented market.
Tokenization has also expanded into pre-IPO markets, allowing investors exposure to private companies before they go public. However, companies like OpenAI and Anthropic have opposed unauthorized tokenized stocks tracking their valuations. This tension underscores the importance of clear regulatory frameworks.
Legislative Context: The CLARITY Act
The SEC’s move comes amid broader legislative efforts to regulate digital assets. On May 14, the Senate Banking Committee advanced the CLARITY Act, setting it up for a full Senate vote next month. The Act aims to provide legal clarity for blockchain-based securities. Industry figures like “Shark Tank” investor Kevin O’Leary have stated that Wall Street firms will fully embrace tokenization only when such frameworks are in place and ownership issues are resolved.
If the innovation exemption is implemented, it could significantly alter the landscape for trading public equities. While it opens doors for decentralized platforms, it also raises questions about issuer consent, investor protections, and market integrity. As the SEC finalizes details, stakeholders remain divided over the best path forward for integrating tokenized assets into the mainstream financial system.
The SEC did not immediately respond to a request for comment from Cointelegraph. Market observers will be watching closely for the official announcement and subsequent rule specifics.
Source: Cointelegraph News