SEC launches innovation exemption for tokenized stock trading in U.S.

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SEC innovation exemption for tokenized stocks

Highlights

SEC launches an immediate five-year 'innovation exemption' allowing certain tokenized securities venues and liquidity providers to operate outside traditional exchange and dealer definitions.
The exemption follows the Senate's 49-50 rejection of the Clarity Act and forms part of the SEC's broader Project Crypto agenda for digital asset regulation in 2024.
Venues under the exemption must comply with sanctions rules, cannot trade synthetic instruments, and issuers can restrict their securities from these platforms.

Exemption framework and immediate rollout

According to The Block, the Securities and Exchange Commission said on Thursday that its new "innovation exemption" is designed to let parts of the capital markets operate with blockchain-based trading infrastructure. In a statement, SEC Chair Paul Atkins says the move is intended to push U.S. capital markets into a digital era after the Senate did not advance the Clarity Act.

Under the exemption, certain tokenized securities venues are not treated as exchanges, and some liquidity providers are not treated as dealers when they trade stocks or provide liquidity through automated market makers, or smart contracts. The SEC says the exemption takes effect immediately, allows public comments and is set up as a five-year measure while more permanent rules are developed.

The agency says the relief does not cover synthetic instruments that mirror an asset's price without direct ownership. Venues operating under the exemption must still comply with sanctions rules, and issuers retain the ability to block their securities from trading on those platforms.

Broader digital asset rulemaking push

The SEC's action follows the Senate's 49-50 vote against the Clarity Act, which would have created a comprehensive federal framework for the digital asset industry. Atkins said earlier this week that the agency would act within its statutory authority to provide more certainty for investors and firms developing new financial technology.

The exemption has been in development for more than a year, according to an SEC spokesperson, and reflects market demand as the regulator advances its broader Project Crypto agenda. That effort includes planned changes to broker liquid capital requirements, record-keeping standards and exchange rules for digital assets before the end of the year.

Earlier this year, Atkins also outlined work on a token taxonomy to distinguish which cryptocurrencies count as securities. The SEC and Commodity Futures Trading Commission say they are coordinating under Project Crypto, while CFTC Chair Michael Selig says he is ready to deliver rules for what he called the new frontier of finance.

Our earlier coverage of the House Ways and Means Committee’s digital asset tax clarity package explained how lawmakers were advancing legislation to establish clearer federal tax treatment for digital assets as part of a broader markup. We also noted that the package paired tax-rule updates with proposals to improve tax administration and expand access to health and welfare services, framed as measures to strengthen economic resilience and supply-chain stability.

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