SEC May Unveil Tokenized Stock Rules This Week, Weighs Allowing Third-Party Issuance

The U.S. Securities and Exchange Commission may unveil a new regulatory framework for tokenized stock trading as early as this week.

Bloomberg reported on May 18 that the SEC is preparing to roll out an "Innovation Exemption" framework for blockchain-based digital securities trading as soon as this week.

The agency is also actively considering whether to allow trading in "third-party tokens" that track the share prices of listed companies without the companies' approval, the report said.

Those tokens would not be actual shares issued on a blockchain. Instead, they would be digital assets designed to mirror the price moves of specific stocks. In the market, they are viewed as blockchain-based equity-linked products.

The tokens could trade on decentralized finance, or DeFi, platforms. Unlike common stock, they may not include voting or dividend rights.

Market participants say the move could serve as a key regulatory test of whether the structure of traditional securities markets can change.

If third parties are allowed to issue stock-linked tokens without approval from listed companies, a separate parallel market could emerge outside the existing securities regulatory framework.

The SEC has previously described tokenized securities as falling into two categories: direct issuance by the issuer and third-party issuance.

The agency is still coordinating the details internally, and the final framework could change in some respects.

The SEC said it is in broad discussions with market participants as it designs rules for new forms of trading structures.