U.S. SEC to again delay 'innovation exemption' for tokenization amid Wall Street, White House concerns

The Securities and Exchange Commission (SEC) announced plans to further delay its anticipated innovation exemption for tokenized securities trading amid concerns from both the White House and Wall Street, according to industry sources. The exemption, expected to be released this Friday, would have eased regulatory hurdles for firms looking to issue and trade tokenized securities on blockchain platforms under existing securities laws.

However, the SEC canceled a scheduled meeting to discuss the exemption on Friday. White House officials worry the proposal could lead to complications in pending cryptocurrency legislation, while SIFMA, a Wall Street trade group representing major broker-dealers and investment banks, has emerged as a main detractor. The group's concerns primarily revolve around how blockchain-based trading venues would fit within existing equity-market rules and brokers' obligations to provide best execution for customers.

The SEC's support for tokenization has grown, with the agency viewing blockchain as a means to modernize financial markets. However, the debate over how financial assets may come onto-chain and how blockchain-based markets can fit into the existing U.S. market structure remains unresolved.