SEC Softens on Third-Party Tokenization
The U.S. Securities and Exchange Commission is preparing to introduce a limited “innovation exemption” that could allow blockchain-based trading of public company shares outside traditional stock exchanges. According to cointelegraph.com, the exemption may be announced as soon as this week, following months of internal debate and industry consultation involving hundreds of market participants.
Unlike its January 28 guidance, which required companies themselves to approve any blockchain-based version of their shares, the SEC is now leaning toward permitting third-party platforms to tokenize stocks without issuer consent. This reversal means platforms like Kraken’s xStocks and Robinhood’s Arbitrum-based equities could offer tokenized versions of stocks even if the underlying companies have not formally integrated blockchain into their shareholder records.
Platforms such as OKX and Bullish are among those preparing to expand tokenized equity offerings following the SEC's reported shift.
On paper, this opens the door for rapid expansion of tokenized securities trading; but it also means these tokens would not carry voting rights or dividends for holders, distinguishing them from traditional shares.
Wall Street Eyes 24/7 Blockchain Trading
Interest in stock tokenization has surged among major financial institutions. In January, Intercontinental Exchange—the parent company of the New York Stock Exchange—announced plans to launch a platform enabling 24/7 trading and settlement of stocks and ETFs using blockchain technology. Earlier this month, Bullish, a crypto exchange led by former NYSE president Tom Farley, acquired Equiniti for $4.2 billion to bolster its tokenization capabilities.
The Depository Trust & Clearing Corporation (DTCC) plans to begin limited production trades of tokenized assets in July, with a broader rollout expected in October.
Meanwhile, Nasdaq received SEC approval in March to support tokenized share trading that preserves traditional ownership rights, while the NYSE secured similar approval in April and is currently developing an on-chain settlement platform. These moves reflect a growing consensus that blockchain could streamline post-trade processes and enable round-the-clock equity markets—a sharp contrast to the current T+1 settlement cycle adopted by U.S. equities in 2024.
See Also
Tokenized Equities Market Hits $30B
The market for tokenized securities has expanded rapidly, with year-over-year growth reaching 200% and total value climbing to $30 billion. Data from RWA.xyz shows that over 2,200 assets are now represented as tokenized equities, with a monthly transfer volume of $3.24 billion and approximately 265,000 holders participating in these markets.
The surge in activity is not limited to crypto-native players: DTCC, BlackRock, JPMorgan, and Franklin Templeton have all launched or filed for tokenized products within the last month. As more institutions experiment with digital representations of traditional assets, the infrastructure supporting these markets is evolving quickly—sometimes outpacing regulatory clarity.
Regulator Divided Over Crypto Stock Shift
Not all SEC officials are aligned on this shift toward blockchain-based equity trading. While Commissioner Hester Peirce has been a leading advocate for granting an innovation exemption to facilitate experimentation with tokenized stocks, other officials have reportedly voiced concerns about investor protections and market stability. SEC Chair Paul Atkins described the plan as a temporary framework with strict limits—including volume caps and white-listed buyers—to mitigate risks during its initial phase.
It's unclear how long this "cabined" exemption will remain in effect or whether it will ultimately lead to permanent rule changes. However, Bloomberg Law reported on May 18 that SEC staff continue to define tokenized securities as traditional securities represented digitally—meaning federal securities laws apply regardless of whether shares reside on blockchains or legacy systems like DTC accounts.
Why It Matters: Practical Impact
For everyday investors and fintech platforms alike, the innovation exemption could lower barriers to accessing U.S. equities and enable new forms of liquidity via automated market makers (AMMs) or decentralized venues. The ability to trade stocks around the clock—rather than just during standard market hours—may appeal especially to global investors or those seeking faster settlement cycles than even T+1 can provide.
However, since tokens issued under this framework would not confer shareholder rights such as voting or dividend eligibility, they represent economic exposure rather than full ownership. This distinction may limit their appeal for some institutional investors or activist shareholders who value governance rights alongside price exposure.
Ultimately, while the SEC’s move signals a willingness to experiment with new technology under defined parameters, it remains uncertain how broadly these exemptions will be adopted—or whether they will withstand legal scrutiny if challenged by issuers or investor groups wary of unauthorized stock representations on public blockchains.
What still needs confirmation
It remains unclear whether the SEC will officially release the reported “innovation exemption” for tokenized stock trading this week, as suggested by Bloomberg on May 18; if the exemption is not announced in the coming days, platforms like Kraken’s xStocks and Robinhood’s Arbitrum-based tokenized equities will not yet be able to expand offerings without issuer consent.