SEC Looking To Open The Door For Tokenized Stocks: Report

The SEC is developing a framework to allow blockchain-based versions of publicly traded stocks to trade on crypto platforms. An “innovation exemption” for tokenized securities is expected as early as next week. The proposal would create a lighter regulatory pathway for platforms offering digital representations of equities without full registration compliance. Tokens could be issued by third parties that track the price of public company shares without the company’s backing or consent. These tokens would trade around the clock on decentralized platforms and would not include traditional shareholder rights such as voting, dividends, or participation in corporate decisions. Faster settlement and cross-border operation could expand access for investors, but the lack of consent and removal of shareholder protections raise questions about what investors are buying and who is responsible if problems occur.

"The SEC plans to release an "innovation exemption" for tokenized securities as early as next week. The proposal, under development by an agency now led by Chair Paul Atkins, would create a lighter regulatory pathway for platforms offering digital representations of equities without requiring full registration compliance. The SEC did not respond to requests for comment."

"Under the reported structure, third parties could issue tokens that track the price of a public company's shares without that company's backing or consent. The tokens would trade around the clock on decentralized crypto platforms. They would not carry traditional shareholder rights: no votes at annual meetings, no dividend checks, no seat at the table when a company makes decisions that affect its shareholders."

"Tokenized stocks settle faster, operate across borders without the friction of legacy infrastructure, and could open equity markets to investors who have historically been locked out by geography or cost. The vision is ambitious: proponents want to put the plumbing of the $126 trillion global equity market on blockchain rails."

"The absence of consent from underlying companies and the removal of shareholder protections raise uncomfortable questions about what investors are actually buying - and who is responsible when something goes wrong."

Read at Bitcoin Magazine