SEC Clears Path for Tokenized Stocks on Permissionless Blockchains

The Securities and Exchange Commission (SEC) has taken a significant step forward in its crypto agenda by rolling out an 'Innovation Exemption' that will allow tokenized U.S. stocks to be traded on permissionless blockchains without registering as national exchanges.

The exemption, which takes effect immediately for up to five years, covers only genuine tokenized stocks carrying full rights such as dividends and voting, excluding 'synthetics' that only track a stock's price.

According to SEC officials, qualifying platforms, known as Tokenized Securities Venues (TSVs), will be able to facilitate trading in tokenized versions of U.S.-listed stocks using automated market makers and liquidity pools on public blockchains without registering as national securities exchanges.

Chris Hayes, executive director of the Coalition for Tokenized Markets, pointed out that the issuer protections in the exemption are a positive step, allowing companies to object to unauthorized third-party tokenization within 30 days.