US securities regulator rolls out five-year exemption for tokenized stock trading

On September 17, the U.S. Securities and Exchange Commission (SEC) introduced an exemption that will permit companies to trade tokenized stocks. This exemption, valid for five years, will enable platforms facilitating tokenized stock trading to operate with fewer regulatory burdens compared to traditional exchanges like the Nasdaq and NYSE.

Additionally, liquidity providers in tokenized stocks will also receive a five-year exemption from dealer registration requirements. Platforms are required to notify the issuing company before listing tokenized versions of their stocks, and they cannot offer these products if the issuer objects. Synthetic tokens providing stock exposure via derivatives or other products are not permitted under this exemption.

The SEC's Innovation Exemption aims to facilitate responsible innovation in the cryptocurrency space while maintaining investor protections and market integrity. Prominent crypto players, such as Coinbase, plan to launch tokenized stocks in the U.S. when the rules become effective.