The U.S. Securities and Exchange Commission has delayed plans for a long-anticipated 'innovation exemption' that would have allowed tokenized stocks to trade on decentralized exchanges — without the consent of the underlying companies. The exemption, drafted by SEC staff, is now on hold as the regulator weighs input from stock-exchange officials and other market participants, according to people familiar with the matter.
What the exemption would have done
Under the proposed framework, decentralized exchanges could have listed digital representations of publicly traded equities — think tokenized Apple or Tesla shares — even if the original issuer hadn't authorized it. The idea was to expand access to 24/7 trading, fractional ownership, and lower costs, including for non-U.S. citizens. But critics warned the plan would open a regulatory can of worms.
The risks that killed the timeline
SEC staff flagged several unresolved questions: How would companies fulfill shareholder rights like dividend distribution and voting? What happens if tokenized shares end up in the hands of sanctioned entities overseas? Tiger Research director Ryan Yoon warned that allowing third-party token trading could fragment liquidity, create price discrepancies, and increase slippage — while sending revenue offshore. 'It's a classic case of speed versus safety,' Yoon said.
Industry reactions split
SEC Commissioner Hester Peirce, a longtime crypto advocate, said any eventual exemption would be 'limited in scope' to digital representations of the same equity security already trading in secondary markets. Coinbase chief legal officer Paul Grewal praised the SEC for 'preparing diligently and moving ahead under existing authority to provide clarity' on tokenization. The exchange has been pushing for clearer rules on tokenized assets for months.
Meanwhile, markets bounce back
In a separate development, crypto markets recovered this week after President Trump announced a largely negotiated deal with Iran, including the reopening of the Strait of Hormuz. Bitcoin reclaimed $77,000 after dipping to $74,200. The move eased broader risk-off sentiment that had weighed on digital assets for days.
The SEC hasn't set a new timeline for the exemption. Staff are expected to continue gathering feedback from exchanges and issuers, but any final rule is likely months away — and could face legal challenges if it moves forward without clearer guardrails.
