SEC clears path for onchain trading of tokenized stocks
The exemption is initially limited to five years.
The US Securities and Exchange Commission has granted blockchain-based trading platforms a five-year conditional exemption to facilitate trading in certain tokenized securities, allowing them to operate automated market makers and liquidity pools without being treated as exchanges under existing US securities law, according to a Sept. 17 statement.
Under the order, tokens must represent actual ownership of the underlying stock and provide investors with the same rights as traditional shareholders, including dividend and voting rights. The SEC excluded synthetic tokens and derivatives that do not confer ownership. Tokenization can be carried out by either the stock issuer or an eligible third party.
Rather than requiring platforms to receive formal designation from the SEC, the framework allows eligible venues to notify the agency before launching. A Tokenized Securities Venues, or TSV, must also provide a company with 30 days’ notice before tokenizing its securities, giving the issuer an opportunity to object.
The SEC said tokenization could modernize issuance, trading, transfers, settlement and ownership records while potentially lowering costs, improving transparency and expanding liquidity.
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SEC Chairman Paul Atkins said the measure creates a temporary framework for firms while the agency considers additional action and longer-term rules governing onchain markets. He said the policy would need to be followed by durable rulemaking if onchain trading is to become a lasting part of US capital markets.
The SEC’s action follows the Senate’s failure to advance the CLARITY Act, which received 49 votes Tuesday, below the 60 required to proceed. Atkins said Wednesday that the SEC would act within its existing statutory authority to provide greater certainty for investors and companies developing blockchain technology.
The agency has also recently proposed changes to crypto offering rules and transfer-agent requirements that would accommodate blockchain-based securities records. For now, the tokenization framework rests on the SEC’s existing exemption powers rather than legislation establishing a broader US crypto market structure.