Key Insights:
- SEC proposes limited onchain trading of tokenized equities under a structured innovation exemption framework.
- Peirce and Atkins say tokenized securities remain securities despite blockchain-based trading models.
- Nasdaq, DTCC, NYSE, Kraken, and Robinhood expand tokenized equity activity as SEC reviews rules.
The Securities and Exchange Commission (SEC) is weighing a limited onchain trading framework for tokenized equities as part of a proposed innovation exemption. Agency leadership said the measure would allow restricted trading of certain tokenized securities on new platforms. Officials described the approach as incremental rather than transformative.
Speaking Wednesday at ETHDenver, SEC Chair Paul Atkins and Commissioner Hester Peirce discussed how the exemption could function. The conversation took place during a public question-and-answer session. Atkins said he plans to unveil a broader proposal to fast-track crypto products.
SEC Innovation Exemption Targets Limited Onchain Securities Trading
Atkins said the innovation exemption would facilitate limited trading of certain tokenized securities. He explained that the goal is to support the development of a long-term regulatory framework. The exemption would apply to novel trading platforms operating in controlled conditions.
He stated that market participants should have the option to trade certain tokenized securities through automated market makers. He also referenced decentralized platforms that rely on algorithms to execute trades. Atkins said participants should decide whether to use public, permission less blockchains.
However, he added that many Americans may prefer intermediaries to custody and trade assets on their behalf. He said the SEC should not make that choice for them. Instead, he framed the exemption as a structured pathway within existing law.
Peirce reiterated that tokenized securities remain securities under U.S. rules. She said some traditional finance critics fear that an innovation exemption could weaken existing safeguards. At the same time, she said crypto advocates may expect broader regulatory shifts than the proposal would deliver.
“Both groups are likely to realize that the innovation exemption is not as monumental as either faction anticipated,” Peirce said. She described the proposal as an important but limited step. She said it would not overhaul the financial system overnight.
Market Interest in Tokenized Equities Expands
The SEC’s review comes as market interest in tokenized equities grows. Over the past year, both crypto firms and traditional finance institutions have explored blockchain-based stock trading. Nasdaq and the Depository Trust and Clearing Corporation have examined tokenization initiatives.
If approved, crypto companies could offer blockchain-based trading of traditional stocks. That shift could place them in competition with established brokerages. The SEC has not finalized any authorization tied to the innovation exemption.
Global activity has also increased. Kraken reported lifetime trading volume of about $25 billion for its xStock product. Robinhood’s real-world-asset-focused blockchain recorded more than four million transactions in its first week.
In December, the Depository Trust and Clearing Corporation received authorization to tokenize certain highly liquid assets. The approval covers a three-year period and applies to pre-approved blockchains. The authorization does not establish permanent rules.
Last month, the New York Stock Exchange said it is developing a platform for trading and onchain settlement of tokenized securities. The exchange indicated that the system could support 24/7 trading.
Cautious Approach to Onchain Securities
Although the SEC has stepped up crypto-related rulemaking under Atkins, it has taken a measured stance on onchain securities trading. The agency is still evaluating the role of tokenized equities in the federal securities laws. Officials have not said how long it’ll take to give final approval.
The limited onchain trading framework for tokenized equities would operate within defined parameters. Atkins described it as a testing ground for integrating tokenization into U.S. capital markets. He emphasized that the framework would remain bounded by existing legal standards.
Peirce’s comments reflected similar restraint. She said the exemption would advance integration without bypassing securities rules. As discussions continue, the SEC weighs a limited onchain trading framework for tokenized equities as a controlled step toward broader policy clarity.
