SEC Clears Path for Tokenized Stocks in US Market
Tokenized stocks have gained momentum in the US after the Securities and Exchange Commission (SEC) announced its Innovation Exemption, which creates a path for certain venues to trade tokenized National Market System (NMS) stocks onchain without registering as a securities exchange.
The exemption is temporary, lasting five years, during which time the market will develop while the commission evaluates future rulemaking. The SEC's order excludes synthetic exposure, meaning tokens that provide economic exposure but not legal or beneficial rights to holders are not compliant.
Coinbase and Ondo Finance have existing tokenized stock offerings that may fit the new rules, with Coinbase's current product being available only for non-US customers and its exchange infrastructure built around a central limit order book. Uniswap's permissioned pools could also be adapted to the SEC's model, potentially giving it an advantage in this space.
The exemption is designed around permissioned AMM liquidity pools, which requires Know Your Customer (KYC) verification, record keeping, public notices, and transaction transparency. If token issuers can connect their infrastructure to shareholder rights and regulatory requirements, the advantages of tokenized stocks, including 24/7 trading, fractional ownership, faster settlement, onchain composability, and shareholder rights, may become more attractive to investors.