Key facts
- The SEC has issued a five-year "Innovation Exemption" for trading tokenized US stocks.
- Qualifying platforms, called Tokenized Securities Venues (TSVs), can trade tokenized US stocks on permissionless blockchains without registering as national exchanges.
- The exemption applies only to genuine tokenized stocks with full rights, excluding synthetic tokens.
- Issuers have a 30-day window to object to the third-party tokenization of their shares.
- Limits will be placed on the number of stocks and daily trading volume per TSV.
- Liquidity providers in these markets also receive a five-year exemption from dealer registration requirements.
The U.S. Securities and Exchange Commission (SEC) has introduced a five-year "Innovation Exemption" that permits limited trading of tokenized U.S. stocks on specific onchain venues, aiming to integrate digital assets into traditional financial markets. This move follows the stalled Clarity Act in the Senate.
Qualifying platforms, known as Tokenized Securities Venues (TSVs), can facilitate trading in tokenized versions of U.S.-listed stocks using automated market makers and liquidity pools on public, permissionless blockchains without needing to register as national securities exchanges. Certain firms supplying liquidity will also receive separate relief from dealer registration requirements. The exemption takes effect immediately and lasts up to five years.
According to SEC officials, the exemption covers only genuine tokenized stocks that carry the same rights as their traditional counterparts, including dividends and voting rights. It explicitly excludes "synthetics" that only track a stock's price. While TSVs will operate on permissionless blockchains, access to the trading venue itself will be permissioned, requiring users and liquidity providers to meet eligibility criteria. The SEC will not individually approve each TSV; firms meeting the requirements can notify the Commission and operate under the exemption.
Limits will be imposed on the number of stocks each TSV can offer and the daily trading volume for individual stocks. Crucially, issuers have a 30-day period to object to the third-party tokenization of their shares. Chris Hayes, executive director of the Coalition for Tokenized Markets, noted that these issuer protections should help curb synthetic tokenization and provide investors with greater clarity.
SEC officials described the exemption as a temporary measure intended to gather data and inform future rulemaking and potential legislation, potentially pushing DeFi platforms into direct competition with traditional exchanges.