SEC Gives Green Light for Tokenized Stock Trading on Blockchain

Robinhood's push to make stocks trade like cryptocurrencies has received a significant boost from the US Securities and Exchange Commission (SEC). The SEC has introduced a five-year Innovation Exemption, allowing qualifying venues to trade tokenized National Market System stocks on blockchain. This move enables 24/7 trading outside regular market hours, subject to individual asset trading capabilities.

The SEC's framework is temporary, conditional, and subject to limits on eligible symbols and trading volume. Issuer objections and compliance requirements may also constrain adoption. However, the regulatory direction gives Robinhood an opportunity to expand its international tokenization business into the US market.

Robinhood has been testing this model abroad, with CEO Vlad Tenev stating that their existing stock tokens provide economic exposure to underlying US securities but are issued through a subsidiary in Jersey and not available to US persons. The company aims to leverage the shift towards onchain trading, which could bring benefits such as 24-hour access, instant settlement, and fractional ownership.

The SEC's move does not mean Robinhood can immediately turn every US stock into a 24/7 token. However, it provides an opening for the company to build a larger onchain market in the US, which could increase trading activity, users, and revenue.