U.S. equity markets face a potential shakeup as the Securities and Exchange Commission readies a new policy that would allow crypto companies to offer blockchain-based stocks, analysts and lawyers said.
The crypto industry says tokenized stocks — blockchain-based instruments that track traditional equities — could revolutionize stock markets by allowing shares to be traded 24/7 and settled instantly, boosting liquidity and reducing transaction costs.
industry insiders expect President Donald Trump’s SEC chair, Paul Atkins, to unveil an “innovation exemption” soon. Atkins has said this would allow companies to experiment with new digital asset business models without having to comply with all of the SEC’s disclosure and investor-protection rules.
Most notably, the exemption is expected to allow firms to offer trading in tokenized versions of existing U.S. stocks.
CRYPTO EXCHANGES READY TOKENIZED STOCKS
Prominent crypto players including Coinbase have signaled that they plan to launch tokenized stocks in the United States when the rules allow. Robinhood, Kraken and several other crypto exchanges already offer tokenized stocks overseas, while Coinbase on Tuesday announced it would soon launch such products outside the U.S.
While Atkins has previously said the innovation exemption will be temporary and limited, over the long term it could pave the way for major structural changes to equities markets, bringing such crypto upstarts into direct competition with traditional brokerages like Morgan Stanley’s E*Trade and Charles said analysts and attorneys. Some regulatory experts and traditional Wall Street companies have warned that tokenized stock trading could create new risks for the system and investors, depending on how the exemption is structured.
REA
The combined global value of tokenized public stocks geared toward retail investors has grown rapidly since the end of 2024, when the market was worth just a few million dollars, according to RWA.xyz, which tracks tokenized assets.
The market capitalization of tokenized stocks now stands at more than $6.4 billion, according to data provider CoinMarketCap.
Ladan Stewart, the global head of fintech and a partner at White & Case, said the innovation exemption would be a “significant win” for the crypto industry.
It could potentially allow crypto firms to perform various stock market functions simultaneously, like trade execution and clearing, without complying with the full set of rules applicable to SEC-registered intermediaries like exchanges and broker-dealers, she added.
The SEC declined to comment.
INVESTOR RISKS, MARKET WORRIES
The innovation exemption is part of a broader SEC crypto policy U-turn under Trump, who courted crypto cash on the campaign trail by pledging to end a crackdown on the industry under the Biden administration.
Atkins has also said the agency is planning to issue a proposed rule that would offer a safe harbor allowing some crypto companies to raise capital without having to comply with traditional securities offering rules.
Both policy efforts have taken on more importance as the window for Congress to pass landmark crypto legislation narrows, said analysts.
Some Wall Street firms and organizations, including Citadel Securities and the Securities Industry and Financial Markets Association, however, oppose the innovation exemption, arguing such major structural changes should not be granted on an ad hoc basis and should go through a formal rule-change process instead.
Atkins said last month that in addition to the innovation exemption, the SEC may consider a formal rulemaking.
Citadel Securities last year also raised concerns with the SEC that tokenization would siphon liquidity away from public markets. Citadel Securities and SIFMA declined to comment.
Some attorneys and regulatory experts have also flagged that the novel products could pose risks to investors. Most tokenized stocks are pegged to public companies and issued by third parties, with some backed 1:1 by underlying shares and others providing exposure through derivatives. Although many are marketed like stocks, they do not always offer the same rights, disclosures and protections as traditional equities, Reuters has reported.
In a social media post last month that appeared to acknowledge those worries, SEC Commissioner Hester Peirce said she expects the innovation exemption would permit only tokenized stocks that confer the same rights and protections as traditional equities.
Peirce declined to comment.
