SEC Gives Tokenized Stocks Conditional Exemption to Trade on Blockchain

The US Securities and Exchange Commission (SEC) has issued a conditional exemption for tokenized versions of US-listed stocks, allowing them to trade on blockchain-based venues without registering as national securities exchanges. This move is seen as a temporary bridge to permanent rulemaking.

The exemption was announced just two days after the Digital Asset Market Clarity Act failed in the Senate, which would have assigned crypto regulatory authority across agencies and given the Commodity Futures Trading Commission (CFTC) exclusive jurisdiction over spot-market trading in tokens that qualify as digital commodities.

Ryan VanGrack, Coinbase's vice chairman and a former SEC adviser, welcomed the decision, saying 'tokenization is the biggest upgrade to financial infrastructure since Wall Street ditched paper for electronic trading'. He added, 'it's no longer a question of whether tokenization will reshape finance - it's a question of where.'

However, some observers have raised concerns about how much this exemption actually changes for investors. Kenneth E. Bentsen Jr., president and CEO of SIFMA, said that the exemption could allow multiple tokenized versions of US-listed securities to trade in parallel, lightly regulated markets, which could lead to investor confusion and harm.

Alvin Kan, COO of Bitget Wallet, noted that the distinction between stock ownership and a token that tracks a stock price is crucial. He said 'investor rights, not 24/7 trading or faster settlement, may become the real dividing line in the tokenized-stock market'. The SEC exemption requires tokens to carry the same economic and governance rights as the shares they represent.