TLDR
- The SEC’s Investor Advisory Committee voted to support limited exemptions for tokenized securities trading under strict conditions.
- The committee called for mandatory disclosures and routine outside supervision for blockchain-based stock platforms.
- The panel said tokenized equity securities still meet the legal definition of securities under U.S. law.
- Chairman Paul Atkins said the SEC will consider an innovation exemption to allow limited trading activity.
- The recommendation requires trading systems to ensure investors receive the best terms for their orders.
The SEC’s Investor Advisory Committee voted to support limited policy relief for tokenized stock trading on Thursday. The panel urged the agency to grant narrow exemptions while keeping core investor protections in place. SEC Chairman Paul Atkins said the commission will consider an innovation exemption soon.
Committee Endorses Tokenized Securities Framework with Safeguards
The committee recommended that the SEC allow limited trading of tokenized securities under defined conditions. It said firms must provide mandatory disclosures and accept routine outside supervision. It also required that trading systems ensure all investors receive the best terms for their orders.
Members stated that tokenized equity securities still meet the legal definition of securities. Therefore, they said issuers and platforms must follow parallel safeguards used in traditional markets. The recommendation document warned that reforms could introduce risks and higher costs that outweigh benefits.
The panel explained that tokenized securities record ownership directly on a blockchain. As a result, delivery of the token and payment can occur in one transaction. This structure can replace brokers, transfer agents, and centralized settlement databases.
SEC Leadership Signals Next Steps on Innovation Exemption
SEC chairman Paul Atkins praised the committee’s work during public remarks on Thursday. He said the group recognized that tokenization can enhance settlement efficiency and reduce settlement risk. He added that tokenization can eliminate unnecessary intermediaries in stock trading.
Atkins said the commission is working toward formal regulations on tokenization.
He stated, “I expect the Commission to soon consider an innovation exemption to facilitate limited trading of certain tokenized securities.” He said the agency will develop a long-term regulatory framework after reviewing limited trading activity.
The committee includes veterans from major trading firms, institutional investors, and academic experts. Their vote provides formal backing for the agency’s ongoing work on blockchain-based trading. The recommendation now moves to the full commission for consideration.
The traditional stock settlement process can take one day or more to complete. In contrast, blockchain-based settlement can execute instantly when both assets move together. This approach embeds ownership records directly into a single blockchain ledger.
However, the committee addressed risks linked to new trading structures.
It wrote, “The most significant risk associated with the tokenization of equity securities is that these reforms or grants of exemptive relief could introduce new risks that investors do not understand.” It added that higher costs could outweigh the benefits of tokenization.
The recommendation requires clear disclosures about how tokenized systems operate. It also calls for supervision to match standards applied in existing securities markets. The committee said these measures aim to align innovation with investor protection.
Atkins said the commission will review the recommendation in the near term. He indicated that staff is preparing materials related to a potential exemption order. The agency has not set a specific date for a vote.
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