SEC Chair: Building a Bridge to Durable Rules for On-Chain Trading of Tokenized Stocks

BlockBeats news, September 17 — SEC Chairman Paul Atkins issued a statement regarding the "innovation exemption" approved by the Commission. He noted that just over a week ago Congress failed to advance the CLARITY Act, so today the SEC is taking an important step within its statutory authority to bring U.S. capital markets into the digital age by facilitating on-chain trading of certain tokenized equities.

The order grants two types of temporary, conditional exemptions under Section 36(a)(1) of the Exchange Act: first, exempting "Tokenized Securities Venues" (TSVs) from the "exchange" definition under the Exchange Act; and second, exempting certain liquidity providers ("Regulated Firms") from the "dealer" definition. Atkins emphasized that the federal securities laws' anti-fraud and anti-manipulation provisions fully apply to all securities activity in these markets, without exception.

The exemption comes with multiple investor protection conditions: TSVs must be U.S. entities and comply with OFAC sanctions compliance; they must establish permissioned access standards allowing only specified participants to trade; synthetic products may not be used — tokenized NMS "National Market System" stocks must be tokenized by the underlying stock issuer or its representative, or by a third party not affiliated with the issuer, and holders must enjoy the same rights as traditional securities (including dividends and voting rights); issuers have the right to object to and block trading of their securities on TSVs.

Atkins stated that the Commission is not freezing current technology as the standard for the future, but rather allowing the market to evolve, monitoring its development, and using that as a basis to formulate a more flexible, forward-looking regulatory framework. The exemption is a temporary measure, and the Commission is seeking public comment on all aspects, emphasizing that this transitional arrangement must be followed by durable rulemaking to ensure that on-chain markets maintain a viable path as capital markets evolve.