US SEC's tokenized securities exemption conditions spark disagreement, industry calls for clear 'public and permissionless' standards.

BlockBeats news, October 24 - The innovation exemption for tokenized securities trading venues introduced by the U.S. SEC in September is sparking industry controversy over blockchain eligibility standards. The exemption allows eligible companies to trade tokenized U.S. stocks without registering as traditional stock exchanges, but requires their smart contracts to be auditable, public, and deployed on public, permissionless blockchains.

Currently, three companies have submitted notices of intent to operate to the SEC. TSV LLC plans to use the privacy-focused Canton Network; OKXICE and Kephas Corp. intend to use Ethereum Layer 2 networks developed by their respective corporate groups.

The Solana Policy Institute, in a comment letter submitted on Thursday, urged the SEC to tighten the definition of "permissionless," focusing on who actually controls the blockchain, including who can validate or block transactions and modify network rules. Hedera, on the other hand, advocated expanding the exemption scope, arguing that only authorized entities being able to participate in validation should not disqualify its network.

The Securities Industry and Financial Markets Association (SIFMA) also called for clarity on which blockchains are eligible and questioned whether stock tokenization should require explicit prior consent from issuing companies, rather than requiring companies to opt out. Financial regulatory advocacy group Better Markets urged the SEC to withdraw the exemption and instead engage in formal rulemaking.

An SEC official stated that companies meeting the exemption conditions can begin operations 30 days after submitting notice, without waiting for SEC approval, and this does not represent SEC endorsement of their chosen blockchain. The official said the regulator intentionally kept the definition broad to leave room for corporate experimentation; additional FAQs may be issued later, and substantive adjustments would require Commission action.

Meanwhile, more companies are opposing the tokenization of their own stocks. As of Friday, 22 of the 62 companies initially listed by OKXICE have raised objections, more than one-third. New opponents include Wells Fargo, Arm, and Intuit.