SEC Moves Forward with Tokenized-Securities Exemption for 24/7 Trading

The Securities and Exchange Commission (SEC) is moving forward on an 'innovation exemption' for tokenized listed securities that would allow compliant on-chain trading while long-term rules are developed.

According to SEC Chair Paul Atkins, the framework would provide a 'cabined framework' for market participants to facilitate compliant on-chain trading. This could potentially pave the way for 24/7 trading of stock tokens on blockchains, as reported by Bloomberg in August.

The exemption is still in development, and its specific requirements are not yet clear. However, Atkins has described it as a 'forthcoming innovation exemption for tokenized listed securities' that would allow market participants to begin facilitating tokenized-securities trading on-chain 'in a compliant fashion'. The framework's structure also matters for stock issuers, who need to distinguish between shares tokenized by a company or its agent and those created by an unaffiliated third party.

The Commission's consideration of the innovation exemption is separate from its scheduled Friday meeting, which concerns whether to issue a proposing release for a tailored offering regime for certain investment contracts involving crypto assets. The Wall Street trade group SIFMA has urged the SEC to subject an innovation-exemption framework to notice and comment and impose investor limits, transaction caps, duration limits, and clearly defined covered activities.