SEC Greenlights Tokenized Stock Trading on Public Blockchains

The Securities and Exchange Commission (SEC) has launched a five-year 'Innovation Exemption' allowing regulated platforms to trade tokenized U.S. stocks on public blockchains without registering as national exchanges.

The exemption, which took effect immediately, gives firms the ability to test blockchain-based stock trading without the need for full registration.

Platforms operating under the exemption can use smart contracts and liquidity pools instead of traditional order books, with a 30-day notice requirement before a third party can tokenize shares.

Trading volumes are capped at 0.25% of average daily volume per venue for the most liquid stocks, with a second tier allowing up to 250 names at 2.5% of daily volume.