SEC Delays Tokenized Stock Trading Exemption Amid Market Structure Concerns

The U.S. Securities and Exchange Commission has delayed plans to permit trading in tokenized stocks, Bloomberg reported on May 24, citing Cointelegraph.

The SEC had planned to unveil an "innovation exemption" framework for tokenized stock trading this week. It postponed a final decision after concerns emerged from exchanges and other market participants.

The agency has already reviewed a draft proposal and collected feedback from hundreds of market participants. It has not yet decided whether to revise the original plan.

The SEC's position is that tokenized stock platforms must give investors the same rights as traditional shareholders, including dividends and voting rights.

Market participants have raised concerns about unauthorized token issuance and blockchain-based ownership verification. Some were particularly focused on the possibility that third parties could issue tokenized shares without the consent of the listed company.

The crypto industry has broadly supported a cautious approach.

Carlos Domingo, chief executive officer of tokenization platform Securitize, said the SEC needs to clearly define which products would qualify for the exemption. Delaying the measure would be better than creating new problems, he said.

Tom Farley, CEO of crypto exchange Bullish, said the SEC appears to recognize that stock tokens can ultimately be issued only by the company itself.

SEC Commissioner Hester Peirce had previously said the exemption would probably be applied on a limited basis.

The SEC in January classified tokenized securities into "custodial" and "synthetic" categories. Custodial structures guarantee ownership of the underlying shares and shareholder rights, while synthetic products provide only price exposure.