By Hannah Lang
Sept 17 (Reuters) – The U.S. Securities and Exchange Commission on Thursday unveiled its long-awaited exemption that will allow companies to offer trading in blockchain-based or “tokenized” stocks and other securities, in a major move that could integrate digital assets more deeply into traditional markets.
The agency is offering a five-year exemption to platforms that facilitate trading of tokenized stocks — digital tokens that represent a stock and can be traded on a blockchain similar to a cryptocurrency — from many of the rules that apply to the Nasdaq, NYSE and other stock exchanges.
It is also offering liquidity providers in tokenized stocks a five-year exemption from dealer registration requirements.
Platforms would be required to notify companies before listing tokenized versions of their stocks, and would be barred from offering those products if the issuer objects, according to an SEC official.
“Synthetic” tokens offering exposure to a stock via a derivative or other product would not be permitted.
The crypto industry says tokenizing securities could revolutionize markets by allowing shares to be traded 24/7 and settled instantly, boosting liquidity and reducing transaction costs. They could also allow investor self-custody and fractional ownership of shares, the SEC said.
The SEC said the exemption is necessary because platforms offering tokenized stocks may face substantial challenges complying with the federal securities laws “without potentially burdensome changes” to their business models.
“The Innovation Exemption is designed to resolve challenges that have prevented responsible innovation from taking root in the United States while providing investor protections and market integrity standards,” said SEC Chair Paul Atkins in a statement.
Prominent crypto players including Coinbase have signaled that they plan to launch tokenized stocks in the United States when the rules allow. Robinhood, Kraken and several other crypto exchanges already offer tokenized stocks overseas.
The new exemption comes just days after the U.S. Senate failed to advance comprehensive cryptocurrency legislation backed by President Donald Trump in a major blow for digital asset companies and Republicans who had championed the bill for months.
Over the long term, the exemption could pave the way for major structural changes to equities markets, bringing such crypto upstarts into direct competition with traditional brokerages like Morgan Stanley’s E*Trade and Charles Schwab, said analysts and attorneys.
The SEC also said on Thursday that tokenized stock trading could enable investors to self-custody their assets and enhance transparency.
The innovation exemption is part of a broader SEC crypto policy U-turn under Trump, who courted crypto cash on the campaign trail by pledging to end a Democratic crackdown on the industry and who has profited from his own crypto ventures.
The SEC in August proposed exempting certain crypto companies and offerings from U.S. securities rules, which should make it easier for crypto companies to issue tokens and raise money.
Although many tokenized stock products overseas are marketed like stocks, they rarely offer the same rights, disclosures and protections as traditional equities. A few companies have issued their own experimental stock tokens on the blockchain – software that acts as a shared digital ledger – but most tokenized shares are pegged to public companies and issued by third parties.
The SEC said that under its exemption, tokenized stocks must offer the same rights and privileges as traditional securities, including rights to receive dividends and exercise voting rights.
(Reporting by Hannah Lang in New York; Editing by Michelle Price and Chizu Nomiyama)
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