U.S. SEC prepares to allow tokenized stock trading in potential equities market shift

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SEC to allow tokenized stock trading

Highlights

SEC Chair Paul Atkins is expected to announce an innovation exemption allowing tokenized trading of U.S. stocks without fully complying with traditional disclosure and investor protection rules.
Major crypto firms like Coinbase, Robinhood, and Kraken are preparing to launch or expand tokenized stock offerings, as the market for tokenized public stocks has grown to more than $6.4 billion according to CoinMarketCap.
Traditional brokers and industry groups like Citadel Securities warn that the exemption could divert liquidity from public markets and raise investor protection risks if not properly regulated.

Expected exemption could open tokenized equities market

As reported by Reuters, crypto industry executives expect SEC Chair Paul Atkins to unveil an innovation exemption that would let companies experiment with digital asset models without fully complying with existing disclosure and investor-protection rules. The measure is expected to permit trading in tokenized versions of existing U.S. stocks, a step that could allow crypto platforms to move further into core equity market functions.

Tokenized stocks are blockchain-based instruments that track traditional shares, and industry backers say they can enable round-the-clock trading, instant settlement, stronger liquidity and lower transaction costs. Coinbase has indicated it plans to launch tokenized stocks in the United States once rules permit, while Robinhood, Kraken and other crypto exchanges already offer similar products overseas. Coinbase also said on Tuesday it will soon launch those products outside the U.S.

Ladan Stewart, global head of fintech and a partner at White & Case, said the exemption would be a significant win for the crypto industry. She said it could allow crypto firms to handle multiple stock market functions, including trade execution and clearing, without following the full rule set that applies to SEC-registered intermediaries such as exchanges and broker-dealers.

Wall Street pushback and investor protection concerns

Analysts and attorneys say the temporary exemption could still lead to broader structural changes in equities trading over time, bringing crypto platforms into more direct competition with established brokerages such as Morgan Stanley's E*Trade and Charles Schwab. The proposal is also part of a wider SEC shift on crypto policy under President Donald Trump, whose administration is moving away from the tougher approach taken under President Joe Biden.

Atkins has also said the SEC is planning a proposed safe harbor rule that would allow some crypto companies to raise capital without complying with traditional securities offering requirements. Analysts say both efforts matter more as prospects for Congress to pass major crypto legislation become less certain.

Traditional market participants are warning that tokenized stock trading could introduce risks depending on how the exemption is structured. Citadel Securities and the Securities Industry and Financial Markets Association argue that such changes should move through a formal rulemaking process rather than an ad hoc exemption, and Citadel previously warned that tokenization could draw liquidity away from public markets.

The market for tokenized public stocks aimed at retail investors has expanded rapidly since the end of 2024, when it was worth only a few million dollars, according to RWA.xyz. CoinMarketCap data shows tokenized stocks now have a market capitalization of more than $6.4 billion, underscoring the scale of a sector that regulators and established financial firms are watching closely.

Regulatory lawyers also note that tokenized stocks do not always provide the same rights, disclosures and protections as conventional shares. In a social media post last month, SEC Commissioner Hester Peirce appeared to acknowledge that concern, saying she expects any innovation exemption would allow only tokenized stocks that carry the same rights and protections as traditional equities.

In our earlier article, we analyzed Coinbase (COIN) amid mixed price momentum and noted how new product rollouts were running into technical headwinds. We also highlighted Coinbase’s push to broaden its platform with offerings such as pre-IPO perpetuals and tokenized U.S. equities, pointing to the growing importance of regulatory clarity for how far these products can go. That backdrop helps frame why a potential SEC innovation exemption could be pivotal for bringing tokenized stocks more fully into the U.S. market.

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