Citing a Bloomberg report on May 25, CoinTelegraph said the U.S. Securities and Exchange Commission (SEC) has delayed the publication of its “innovative exemption” proposal that would allow trading of tokenized stocks, which was originally expected to be released this week. SEC staff have reviewed a draft of the tokenized stock trading proposal and received input from hundreds of market participants on how best to implement the relevant rules. The SEC has not yet decided whether to revise the content of its proposal.
The specific reasons for the delay: two core industry concerns
The industry concerns received by the SEC mainly focused on two areas. First, third parties that are not approved by listed companies could issue large volumes of tokens linked to their shares, creating a risk of market disruption. Second, how to verify tokenized stock ownership on a semi-anonymous blockchain to ensure investors have the same rights as traditional shareholders, including dividends and voting rights. Under the SEC’s proposal, platforms for tokenized stocks must ensure that investors enjoy the full shareholder rights mentioned above.
SEC Commissioner Peirce’s stance and the January regulatory framework
SEC Commissioner Hester Peirce said on Thursday that she expects the scope of the exemption to be “limited,” and would only support the “digital representation” of stocks—similar to the existing securities investors can currently buy on the secondary market. In January this year, the SEC distinguished between types of tokenized securities: “custody-based” tokenized stocks are initiated by the issuer and held in custody by regulated intermediaries, with holders enjoying full shareholder rights; “synthetic” tokenized stocks are created by a third party, provide price exposure, but do not represent actual ownership of the underlying shares.
Industry reactions and market-size data
Securitize CEO Carlos Domingo said on X that it is crucial to ensure the “exemption applies to the right financial instruments,” adding, “Instead of getting it wrong and causing all kinds of problems, it’s better to delay.” Bullish CEO Tom Farley said the SEC “finally realized that only public companies can issue tokens representing shares.” According to data from RWA.xyz, the current market size of tokenized stocks is about $155 million, a small portion of the total tokenized real-world assets ($34 billion), falling short of multi-billion-dollar predictions for tokenization made by Citibank (2022) and McKinsey (2024) for the 2030s.
FAQ
What requirements were originally included in the SEC’s “innovative exemption”?
According to Bloomberg, the SEC’s proposal would require platforms offering tokenized stocks to ensure that investors have the same rights as traditional shareholders, including dividends and voting rights. Commissioner Peirce said she expects the exemption to be limited to the “digital representation” of stocks, rather than synthetic tokenized products. The specific exemption text has not yet been released.
What is the difference between “custody-based” and “synthetic” tokenized stocks?
Based on the SEC’s January distinction: “custody-based” is initiated by the issuer and held in custody by regulated intermediaries, with holders enjoying full shareholder rights (dividends, voting); “synthetic” is created by a third party, provides price exposure, does not represent actual ownership of the underlying shares, and cannot enjoy full shareholder rights.
How big is the tokenized stock market today?
According to RWA.xyz data, the tokenized stocks market is about $155 million, a small portion of total tokenized real-world assets ($34 billion), falling short of multi-billion-dollar predictions by Citibank (2022) and McKinsey (2024) for tokenization volumes in the 2030s.
