SEC’s Peirce Clarifies Tokenized Stock Exemption

US Securities and Exchange Commissioner Hester Peirce has told the crypto industry to cool its expectations about a potential “innovation exemption” to allow tokenized stock trading after a report earlier this week about what it could entail. 

Her comments were made after a Bloomberg report on Monday. Brett Redfearn, president of tokenization platform Securitize, expressed concern following the report, arguing that enabling third parties to tokenize stock “without an issuer at the table” could lead to fragmentation issues. 

In a post to X on Thursday, Peirce said her expectation has always been that any exemption would be “limited in scope” by only permitting “digital representations of the same underlying equity security that an investor could purchase in the secondary market today.”

Peirce said she doesn’t expect synthetic tokens to be included, which would make it more challenging for third parties to offer stock-price tracking tokens under the exemption.

Source: Hester Peirce

Data from RWA.xyz shows that $1.48 billion worth of stocks are tokenized onchain, including shares linked to stablecoin issuer Circle, Bitcoin buying firm Strategy and Google (GOOG). 

However, it hasn’t boomed as rapidly as some financial institutions have expected, including Citibank and McKinsey & Co, which predicted in 2022 and 2024 that the tokenization sector would become a trillion-dollar market by or before 2030.

Peirce’s comments cleared the air

Peirce’s comments are in line with Bloomberg’s report stating that the securities regulator is only considering permitting tokens that carry the same benefits as common stock, such as voting rights and dividends.

Robert Leshner, the CEO of crypto tokenization platform Superstate, said this stricter approach would enable decentralized finance and tokenization to expand “without compromising the standards that make the USA the center of capital markets.”

Carlos Domingo, CEO of Securitize, also said the approach would mitigate the risk of ownership fragmentation in the tokenization market. 

“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.”

Bloomberg said the SEC reportedly spoke with “hundreds of market participants” for feedback on how best to tailor the rules for tokenized trading. 

Related: Kraken parent Payward sees revenue surge as tokenization expands 

Details haven’t been finalized and could change before an exemption is made, Bloomberg added in the report, citing people familiar with the matter. 

Despite the possible exemption, Bloomberg reported that some SEC officials weren’t in support of permitting tokenized stock trading.

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