SEC Approves Five-Year Exemption for Tokenized Stock Trading

The US Securities and Exchange Commission (SEC) has unveiled a long-awaited exemption for companies to offer trading in blockchain-based or 'tokenized' stocks and other securities.

The agency is offering a five-year exemption to platforms that facilitate trading of tokenized stocks from many of the rules that apply to the Nasdaq, NYSE, and other stock exchanges. The exemption also applies to liquidity providers in tokenized stocks, who will be given a five-year reprieve from dealer registration requirements.

Under the exemption, platforms must notify companies before listing tokenized versions of their stocks, and cannot offer those products if the issuer objects. Synthetic tokens offering exposure to a stock via a derivative or other product are not permitted.

The SEC says that tokenizing securities could revolutionize markets by allowing shares to be traded 24/7 and settled instantly, boosting liquidity and reducing transaction costs. They also allow investor self-custody and fractional ownership of shares.