SEC's Peirce Excludes Synthetic Securities From Tokenization Exemption

SEC Commissioner Hester Peirce, known as a crypto-friendly regulator, clarified on the 21st (local time) that synthetic securities are excluded from a planned innovation exemption for tokenized stocks. On the 18th, Bloomberg reported that the SEC was preparing to announce an 'innovation exemption' for stock tokenization, potentially allowing trading of tokens tracking stock prices without company approval or consent. Peirce's statement rejected exaggerated interpretations of the exemption's scope.

Peirce's Clarification on Innovation Exemption

Peirce stated: "Thank you for the interest in the planned innovation exemption for on-chain trading of tokenized stocks, but I am not grateful for exaggerated expressions." She explained that the exemption's scope would be limited and designed to promote trading of digitalized representations of securities available in secondary markets, not synthetic securities.

Definition and Scope

According to Peirce, digitalized representations of securities refer to tokenized instruments based on underlying assets. She clarified that synthetic securities—which lack underlying assets and track only price or index movements through derivatives—would not be included in the innovation exemption.

Market Expectations vs. Reality

Following Bloomberg's initial report on the 18th, market expectations grew regarding formal approval of synthetic securities that lack underlying assets but track prices in derivative form. Peirce's statement on the 21st addressed and rejected these expanded interpretations of the exemption.