Tokenized stock trading is about to take off after SEC issues five-year exemption from securities laws

The cryptocurrency industry has gotten a major boost from the U.S. Securities and Exchange Commission, which today announced a five-year exemption that allows companies to facilitate the trading of blockchain-based tokenized stocks and securities.

It’s a big move that will help to accelerate the SEC’s plan to integrate digital assets into the financial economy. The SEC is offering a five-year exemption to certain platforms, providing them with regulatory relief so long as they meet certain conditions.

The requirements include ensuring that holders of tokenized stocks receive the same rights as they would have with traditional stock holdings, and giving companies the opportunity to object to having digital representations of their securities. In addition, the SEC said it’s giving a similar five-year exemption to liquidity providers, meaning they don’t have to meet the regulatory obligations expected of traditional dealers.

Tokenization, which refers to the process of creating digital representations of publicly-traded securities, or tokenized stocks, that live on blockchain networks, has ignited a lot of interest in the financial community. Proponents of the technology say it could revolutionize financial markets by making it possible for stocks to be traded 24/7 and settled instantly without intermediaries, increasing liquidity and reducing transaction costs. Tokenized stocks also make it easier for investors to retain self-custody of securities, and enable the fractional ownership of individual shares.