SEC to unveil tokenized stock exemption

The Securities and Exchange Commission is expected to issue an innovation exemption as soon as this week that would allow limited on‑chain trading of tokenized U.S. securities under defined volume caps, participant whitelists and built‑in smart‑contract compliance.

The exemption is temporary and narrowly drawn to let qualified firms run supervised pilots while the agency develops longer‑term rules.

SEC staff defined tokenized securities in January 2026 as traditional securities represented as crypto assets, with blockchain networks maintaining ownership records in whole or in part. The legal status of a security would not change because it is tokenized; federal securities laws would apply whether a share is recorded on a blockchain or held in a Depository Trust Company account.

Under the proposal, eligible trading models could include automated market makers and other crypto‑native venues, but activity would be subject to strict volume and participant limits and to whitelisting requirements. SEC Chair Paul Atkins has described the agency as “on the cusp” of releasing a cabined framework for compliant on‑chain trading.

Agency staff have discussed embedding compliance checks directly in smart‑contract code. Tokens could include eligibility rules, transfer restrictions, automated transfer gates and issuer‑holder messaging so compliance is enforced at the point of transfer.

Market incumbents and crypto firms are building competing approaches. Nasdaq received approval in March 2026 to permit certain DTC‑eligible securities to trade in tokenized form on the same order book as traditional shares while preserving T+1 settlement. ICE, the NYSE parent, is developing a regulated digital venue that aims for 24/7 trading, instant settlement, dollar‑sized orders and stablecoin funding.

Crypto platforms have moved as well: Coinbase sought SEC approval in 2025 to offer tokenized equities in the U.S.; Kraken offers fully backed tokenized U.S. stocks and ETFs outside the U.S.; and Robinhood has launched EU stock tokens and is building a layer‑2 blockchain for real‑world asset tokenization.

The on‑chain market for real‑world assets is near $30 billion, about 0.02% of global equity market capitalization, reflecting that stock tokenization remains at an early stage.

Regulators have raised investor protection concerns. Commissioner Hester Peirce warned that third‑party tokenized stocks can expose holders to counterparty and insolvency risks tied to the tokenizing intermediary. SEC staff distinguish issuer‑sponsored tokenized securities, which give a direct claim on an underlying share, from custodial receipts, linked securities and synthetic derivatives that can carry additional counterparty exposure.

Officials and market participants say potential beneficiaries of broader on‑chain activity could include stablecoin issuers that gain a settlement use case, high‑throughput smart‑contract chains that support settlement demand, and new entrants such as wallet providers and tokenization agents.

The innovation exemption is intended as a temporary, supervised experiment: limited pilots with guardrails that will inform any eventual long‑term rulemaking on tokenized securities and their place in U.S. markets.