SEC clears path for tokenized stocks, bringing the market closer to 24/7 trading

The Securities and Exchange Commission on Thursday issued an order creating a regulatory pathway for certain trading venues to issue tokenized representations of publicly traded U.S. stocks, effective immediately.

The so-called Innovation Exemption provides certain trading platforms and liquidity providers with the regulatory relief needed to facilitate tokenized stock trading, provided they meet certain conditions. Two of the requirements have emerged as key points of contention in the investment community: Holders of stock tokens must retain the same rights they would have with traditional equity holdings, and companies must be able to object to having their securities represented as tokens.

The long-awaited move by the securities regulator comes two days after the Clarity Act, crypto's most consequential push for regulatory certainty, failed to advance in the Senate. The crypto market structure bill would have established clear rules for how digital assets, including tokenized securities, are classified and regulated. Now the SEC is moving to define that regulatory boundary through its existing authority.

"The Innovation Exemption is designed to resolve challenges that have prevented responsible innovation from taking root in the United States while providing investor protections and market integrity standards," SEC Chair Paul Atkins said in a statement.