- The SEC’s five-year exemption allows qualifying venues and liquidity providers to operate under temporary registration relief.
- Tokenized stock trading must use public blockchains with permissioned access, disclosures, AML/CFT and OFAC compliance.
- Grayscale says the framework could bring offshore tokenized equity activity into regulated U.S. markets while preserving shareholder rights.
The SEC issued its Innovation Exemption on Sept. 17, allowing limited onchain trading of tokenized stocks under temporary conditions. The order covers qualifying trading venues and liquidity providers, while requiring permissioned participation and public blockchain use. Grayscale Research said the move could connect tokenized equity markets with the regulated U.S. financial system.
SEC Sets Conditions For Tokenized Stock Trading
The SEC order temporarily relaxes two registration requirements for qualifying market participants. Certain trading venues can avoid exchange registration, while qualifying liquidity providers can avoid dealer registration.
However, the exemptions apply only under specific conditions. Transactions must use public blockchains, while participants must receive permission to access the trading system. Trading venues must also publish disclosures before beginning operations.
Meanwhile, fraud, market manipulation, AML/CFT requirements and OFAC screening remain applicable. The order also limits the exemption to five years. It includes restrictions on listings and trading volume, keeping the relief within defined boundaries.
Grayscale Tracks Growth In Tokenized Equities
Grayscale said tokenized equity trading has increased across platforms including Robinhood, BNB Chain and Solana. Its research noted that much current activity occurs offshore through derivative-like wrapper assets.
According to Zach Pandl, Grayscale’s head of research, the SEC order could move more tokenized stock activity into regulated U.S. markets. The structure also allows tokenized securities to retain traditional shareholder rights.
These include voting rights and dividends when the qualifying tokenized stock meets the order’s requirements. For example, Grayscale described a permissioned Uniswap pool where approved users could exchange tokenized stocks for stablecoins.
Paul Atkins Calls Exemption An Interim Measure
SEC Chairman Paul Atkins described the exemption as temporary and said durable rulemaking should follow. The SEC is also seeking public comments on the order and its implementation.
Grayscale said the exemption represents an initial step for tokenized securities markets. Pandl said the framework could allow blockchain-based trading infrastructure to operate alongside compliance requirements and investor protections.
The order therefore sets a defined framework for permissioned onchain trading while the SEC considers additional regulatory action.
