The U.S. Securities and Exchange Commission (SEC) has granted a temporary exemption that will allow limited trading of tokenized U.S. stocks on selected blockchain platforms. The regulator wants to gather data on how on-chain trading works in a controlled environment, which could shape the design of future rules.
The U.S. SEC is opening up further space for linking traditional capital markets with blockchain. On Thursday, the regulator approved a so-called innovation exemption, which will allow limited trading of tokenized U.S. stocks on certain on-chain platforms.
The exemption applies to so-called Tokenized Securities Venues, or TSVs. Under specified conditions, these will be able to offer trading in tokenized stocks that fall under the U.S. National Market System — that is, the market covering securities traded on the major regulated American exchanges.
This is not, however, a blanket opening of the stock market to blockchain platforms. The SEC has set limits on the number of tradable tickers and transaction volumes, and operators will have to meet a range of requirements regarding transparency, record-keeping, and technological security.
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Tokenized Stocks Will Enter Liquidity Pools
One of the most notable changes is the ability to use mechanisms in trading that are typically found in decentralized finance.
The exemption allows trading through automated market makers, known as AMMs, and liquidity pools. Instead of a classic exchange order book, some transactions can thus be executed via smart contracts and capital held in liquidity pools.
A similar principle is used today by, for example, decentralized cryptocurrency exchanges. In the case of tokenized stocks, however, it will operate under a regulatory-restricted regime.
SEC Commissioner Mark Uyeda stated that platforms will have to comply with requirements on transaction transparency, record-keeping, and technological safeguards.
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SEC Wants to See Prices, Volumes, and Pool Addresses
Operators will also be required to regularly disclose detailed trading data. This is meant to include the prices and volumes of individual transactions expressed in U.S. dollars, timestamps of trades, addresses of the relevant liquidity pools, their end-of-day volume, and total daily trading volume.
The SEC thus wants to build a fairly detailed picture of how the trading of tokenized securities on blockchain works in practice. “The innovation exemption is designed to be controllable,” said Uyeda. The framework will therefore also include limits on the number of tradable symbols as well as overall trading volumes.
The data gathered is meant to help the SEC evaluate on-chain trading and prepare any future rules that may be needed.
SEC Wants Real-World Operating Experience
At the same time, the regulator is asking for feedback from the public and market participants themselves. It is particularly interested in concrete data, case studies, and experience from real or test environments. The SEC wants to use this information to assess not only the potential benefits but also the risks associated with moving part of securities trading onto blockchain.
The temporary exemption thus functions as a regulatory experiment. The SEC will allow limited deployment of the new technology while monitoring how trading platforms, liquidity providers, and the market itself behave in practice.
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Atkins Already Announced a Temporary Regime in February
The current decision does not come as a surprise. The SEC had been working on a similar framework for several months. Commission Chairman Paul Atkins already said in February that the SEC was considering a temporary regulatory framework that would allow limited trading of tokenized securities through automated market makers.
According to him, the point was to let the market experiment with the new technology before the SEC finalizes longer-term rules. The regulator thus wanted to create space in which it would be possible to test how on-chain trading works in practice, without immediately changing the entire regulatory framework of U.S. capital markets.
Atkins also noted at the time that trading would be limited and that the whole system was meant to give the SEC the experience and data needed to decide whether current rules would need to be adjusted or whether new rules would need to be created. The exemption approved now puts this idea, which has been in preparation for several months, into practice.
What Are Tokenized Stocks
Put simply, a tokenized stock is a security or a claim tied to a share, represented by a digital token on a blockchain. The technology can enable transfers and trading through infrastructure that today is used mainly for cryptocurrencies and decentralized finance.
Blockchain could, in theory, also simplify transaction settlement, ownership records, or the transfer of assets between market participants.
This is precisely why the SEC’s decision is important for the crypto sector as well. It is not another rule directly targeting bitcoin or ethereum, but rather the gradual entry of blockchain infrastructure into traditional capital markets.
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Blockchain Is Getting Closer to Wall Street
The approved exemption does not yet mean that American stocks will start being widely traded on decentralized exchanges. The SEC has deliberately kept the framework narrow, with trading limits, mandatory data disclosure, and other protective mechanisms.
Still, it marks an important shift. For the first time, the American regulator will obtain more extensive practical data on how the trading of tokenized stocks through AMMs and liquidity pools can function within a regulated market environment.
The results of this experiment could, in the coming years, determine just how large a role blockchain will ultimately play in U.S. securities trading.
