CLARITY Act Stalls, But SEC Gives Crypto a Boost With New Tokenized Securities Rules

The U.S. Senate’s failure to advance the CLARITY Act has left broader crypto market-structure legislation unresolved. The SEC has now taken a narrower step by creating a temporary framework for onchain trading of certain tokenized U.S. stocks.

The Securities and Exchange Commission announced its five-year “Innovation Exemption” on September 17, allowing qualifying Tokenized Securities Venues (TSVs) to facilitate crypto trading in tokenized National Market System (NMS) stocks through permissioned automated market makers (AMMs) and liquidity pools.

Key Takeaways

• The SEC approved a five-year, conditional exemption for qualifying Tokenized Securities Venues to trade certain tokenized NMS stocks through permissioned AMMs and liquidity pools.

• Eligible tokenized shares must provide holders with rights and privileges equivalent to the underlying traditional securities.

• The framework includes requirements covering smart-contract transparency, trading volumes, issuer objections, and coordinated trading halts.

• The SEC also granted conditional relief from certain dealer-registration requirements to qualifying liquidity providers.

• The measure is narrower than the CLARITY Act and is subject to public comment and potential modification.