The US Securities and Exchange Commission (SEC) is delaying plans to roll out broad exemptionsfor US crypto firms to trade tokenized assets linked to stocks, a Bloomberg report said. SEC staff had prepared and reviewed a draft of the proposed “innovation exemption,” which was expected to be released as early as this week.
The plan has now been pushed back as the SEC reviews inputs from stock exchanges and other market participants. Agency staff have held discussions with stakeholders in recent days to share details of the proposal. Here's look at the issues raised by the industry experts:
Third-party tokens
Some stakeholders have raised concerns about allowing the trading of so-called third-party tokens, which would be issued without the backing or consent of the public companies involved. The SEC hasn’t made any decisions to change its draft proposal yet.
Under the SEC’s proposal, platforms offering tokens would need to guarantee investors receive the same rights as regular shareholders — including dividends and voting rights.
However, several former regulators said it remains unclear how companies would meet those requirements, since tokens are traded on blockchain networks where users often remain anonymous.
Sources close to SEC informed Bloomberg, even some SEC officials might not agree to allow for the trading of third-party tokens
Commissioner Hester Peirce, a long-time ally of SEC Chairman Paul Atkins, on Thursday posted on X that she expects the innovation exemption to be “limited in scope” and would “facilitate trading only of digital representations of the same underlying equity security that an investor could purchase in the secondary market today.”
Dividends and shareholder votes
Several experts said public companies could face confusion over routine tasks such as paying dividends and counting shareholder votes if tokenized shares become widely traded on blockchains. Some have already raised that question with stock exchange officials, according to a Wall Street executive.
“If I was a corporate executive, I’d be very concerned about the implications,” said Amanda Fischer, policy director at Better Markets and a former senior SEC official during former President Joe Biden’s administration, as reported by Bloomberg
Misuse of tokenised assets
Another concern is that these tokens could end up with overseas bad actors who may use gaps in blockchain systems to avoid US regulations.
Austin Campbell, a crypto expert and former banker who is now a professor at the NYU Stern School of Business, warned that tokenized securities could potentially end up on platforms that don’t follow strict know-your-customer policies. That raises the risk that sanctioned entities overseas operating on crypto platforms could own the tokens.
“You can’t pay a dividend when you don’t know who owns the token, because it might be the North Koreans,” he said. “It opens a Pandora’s box.”
