SEC Opens Door to Blockchain-Based Trading of US Equities

The U.S. Securities and Exchange Commission (SEC) has taken a significant step towards integrating blockchain technology into traditional stock trading. The regulatory body has unveiled a temporary framework that allows certain tokenized U.S. equities to be traded using decentralized finance (DeFi) infrastructure.

This development is considered a major breakthrough by Michael Saylor, former CEO of Strategy, who sees it as an opportunity for Wall Street and DeFi to converge. The SEC's move paves the way for actual secondary-market trading to take place using mechanisms closely associated with crypto and DeFi.

The framework allows for the use of tokenized stocks, which are essentially blockchain-based representations of publicly traded companies. These tokens can be traded through Automated Market Makers (AMMs) that rely on smart contracts and pools of assets rather than traditional order-book models.

The SEC's decision also provides temporary conditional relief from the Exchange Act's definition of a 'dealer' for certain participants that supply their own tokenized stocks to AMM liquidity pools. This change in treatment of liquidity providers is another significant aspect of the framework.