Crypto regulatory affairs: SEC and CFTC push cryptoasset rulemaking in wake of failed CLARITY vote

In this third edition of crypto regulatory affairs, we will cover:

• SEC and CFTC push cryptoasset rulemaking
• UK issues guidelines on new cryptoasset regime
• Hong Kong continues tokenization and stablecoin push
• South Korea aims to reignite stalled cryptoasset legislation efforts
• ECB flags potential crypto AML gaps
• ESMA will prioritize opportunities and challenges of tokenization in 2027

Regulatory agencies in the United States are pushing ahead with efforts to bring clarity and confidence to cryptoasset markets following Congress’s failure to progress the CLARITY Act.  

On September 17, the Securities and Exchange Commission (SEC) issued its long-awaited “Innovation Exemption.” The SEC’s order grants temporary and conditional relief from US securities laws for Tokenized Securities Venues (TSVs) engaging in secondary market trading of tokenized stocks using permissioned automated market maker (AMM) liquidity pools. For the first time, it will be possible for certain market participants to trade tokenized US-listed stocks on-chain via decentralized finance protocols (DeFi) without having to register with the SEC as securities exchanges or broker dealers. 

TSVs - which bring together buyers and sellers of tokenized stocks - will be able to make use of the exemption for a period of five years, subject to a number of conditions. TSVs must verify that the tokenized stock offered for trading gives holders the same rights as traditional stock and must provide notice to the issuer of the underlying stock that the stock has been tokenized, allowing the issuer an opportunity to object to the tokenization sale.