SEC Commissioner Hester Peirce said any tokenized stock exemption would apply only to real equity ownership.
Crypto News
SEC Commissioner Hester Peirce said on May 21 that any regulatory exemption to allow tokenized stock trading would be limited in scope, cooling expectations that had built following a Bloomberg report earlier in the week. Peirce posted on X that her expectation has always been that the exemption would cover only "digital representations of the same underlying equity security that an investor could purchase in the secondary market today."
The clarification came after Bloomberg reported Monday that the SEC is considering an "innovation exemption" that would allow third-party exchanges to list tokenized stocks. Brett Redfearn, president of tokenization platform Securitize, raised concerns following that report, arguing that permitting third parties to tokenize stock without issuer involvement could lead to ownership fragmentation.
Peirce specified that she does not expect synthetic tokens to fall within the exemption. That distinction would make it considerably harder for third parties to offer tokens that merely track a stock's price, as opposed to tokens that represent actual ownership of the underlying shares. The statement largely aligned with Bloomberg's original characterization that the SEC is considering only tokens carrying the same rights as common stock, including voting rights and dividends.
Robert Leshner, CEO of crypto tokenization platform Superstate, said Peirce's approach would allow DeFi and tokenization to grow "without compromising the standards that make the USA the center of capital markets." Carlos Domingo, CEO of Securitize, said the narrower framework would reduce the risk of ownership fragmentation and limit the spread of derivatives that introduce additional market risk. "This is good, we want to do on-chain trading, but for the right assets, and not to help proliferate those derivatives that are fragmenting the market and introducing additional risks," Domingo said.
Data from RWA(dot)xyz shows $1.48 billion worth of stocks are currently tokenized on-chain, including shares linked to Circle, Strategy and Google. The sector has grown but has not expanded as quickly as some major institutions had forecasted. Citibank and McKinsey projected in 2022 and 2024, respectively, that tokenization could become a trillion-dollar market by or before 2030.
Bloomberg reported that the SEC spoke with hundreds of market participants to gather feedback on how best to design the rules for tokenized trading. The full details of any exemption have not been finalized and could change before an official ruling is issued.
Despite majority support within the industry for the exemption, Bloomberg noted that some SEC officials remain opposed to permitting tokenized stock trading in any form. The divergence within the agency suggests the final scope of any exemption remains subject to internal debate.
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