SEC Creates Temporary Exemption for Trading Tokenized Stocks
The U.S. Securities and Exchange Commission (SEC) has introduced a temporary “Innovation Exemption” allowing approved platforms to trade certain tokenized stocks on blockchain-based markets.
The exemption allows Tokenized Securities Venues (TSVs) to trade tokenized National Market System (NMS) stocks through permissioned automated market makers (AMMs) and liquidity pools. The SEC said the move is intended to help bring U.S. capital markets onto blockchain networks while regulators consider longer-term rules.
SEC Chairman Paul Atkins said the exemption will allow tokenized stocks to trade onchain in a controlled environment while the agency works on potential regulatory changes.
TSVs will connect buyers and sellers through permissioned liquidity pools and must meet several conditions, including:
- Limiting the number of stocks and trading volume available on the platform.
- Ensuring tokenized stocks provide holders with the same rights as the underlying traditional shares.
- Giving stock issuers an opportunity to object when their shares are tokenized by a third party.
- Using public, auditable smart contracts on public blockchains.
- Halting trading when the underlying stock is suspended on its primary exchange.
- Publicly disclosing information about the platform and its trading activity.
The SEC will also temporarily exempt certain liquidity providers from the definition of a “dealer” when they provide tokenized stocks using their own capital.
The exemptions will remain in place for five years after publication. The SEC is seeking public feedback on the rules and possible next steps toward a more permanent framework for tokenized securities.
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