The US Securities and Exchange Commission (SEC) is preparing to issue an innovation exemption aimed at regulating tokenized stock trading on blockchain platforms, potentially transforming how public company shares are traded. This move would allow third-party tokens representing company shares to circulate on decentralized crypto exchanges, even without direct consent from the companies being tokenized.
The exemption could be announced imminently and seeks to expand public company trading outside conventional stock markets while ensuring tokenized shares confer rights similar to common stock, including voting privileges and dividends. Without these protections, tokens risk delisting, signaling a regulatory insistence on investor safeguards. The SEC engaged extensively with market participants to tailor the rules to the unique features of tokenized securities.
One SEC commissioner has strongly advocated for this exemption, recognizing the growing momentum for blockchain tokenization within financial markets. Tokenized stock trading, which uses blockchain technology to digitize equity ownership, offers potential improvements in trading efficiency and settlement speed compared to existing systems.
In the institutional arena, major players are advancing initiatives in this space. The parent company of the New York Stock Exchange announced plans to launch a blockchain-based platform enabling 24/7 trading and settlement of stocks and exchange-traded funds. Similarly, crypto exchange Bullish, led by a former NYSE president, recently bolstered its capabilities through acquiring a transfer agent platform, signaling growing convergence between traditional finance and crypto technology.
Proponents argue tokenized stocks could democratize access to investing, especially benefiting individuals who lack entry to traditional US brokerage services. These digital tokens could allow exposure to shares of prominent companies such as Nvidia, Google, and Tesla through decentralized platforms.
Despite the positive outlook, the proposed exemption faces internal resistance within the SEC. Some officials express reservations about loosening controls over tokenized securities, concerned about potential risks to market integrity and investor clarity.
The president of a leading crypto-native tokenization platform voiced skepticism regarding the exemption, warning that allowing third parties to issue tokenized stocks without issuer approval could fragment the market and confuse investors about the true value of their holdings.
Tokenization has also begun penetrating the pre-IPO market, enabling early investment in private companies before public listings. However, entities like OpenAI and Anthropic oppose unauthorized tokenized versions of their shares, highlighting ongoing legal and regulatory tensions in this evolving domain.