The U.S. Securities and Exchange Commission has opened a temporary pathway for limited on-chain trading of tokenized U.S.-listed stocks, allowing qualifying tokenized securities trading venues to operate under a conditional “Innovation Exemption.”
The SEC’s framework would let approved venues trade tokenized versions of National Market System stocks using blockchain-based infrastructure, including automated market makers and liquidity pools. In return, the venues must operate within limits on trading volume and the number of eligible stock tickers, while meeting disclosure, surveillance, recordkeeping, circuit-breaker, and technical-security standards.
SEC Chair Paul S. Atkins said the exemption gives qualifying tokenized securities trading venues relief from the Exchange Act definition of an “exchange,” while certain liquidity providers can receive relief from the “dealer” definition. The arrangement is designed as a controlled trial rather than a permanent rewrite of U.S. market rules, with the agency seeking operational evidence before considering longer-term regulation.
The decision places tokenized equities closer to the regulated U.S. securities system, rather than leaving stock-linked blockchain products largely confined to offshore derivatives platforms or synthetic products. It also gives the SEC a mechanism to test whether blockchain settlement and ownership records can work within protections familiar to stock-market participants.
Conditions restrict who can trade and which tokens qualify
The exemption contains four central conditions. Tokenized securities trading venues must be U.S. entities and comply with sanctions rules administered by the Treasury Department’s Office of Foreign Assets Control. Trading access must be permissioned, limiting participation to eligible users rather than allowing unrestricted public access.
The SEC has also prohibited synthetic tokenized stocks under the program. That restriction means a token must represent an actual underlying security rather than merely track the price of a listed company through derivatives, collateral arrangements, or an issuer promise. The distinction could limit the type of stock tokens offered under the pilot while reducing the risk that traders confuse price exposure with ownership.
Underlying public companies would retain the right to object to their shares being made available on a tokenized securities venue. That provision gives listed issuers a direct role in determining whether their securities participate in the experiment, a safeguard likely intended to address corporate governance, disclosure, and brand concerns.
Venues using the exemption would also need to publish trading information, maintain records, coordinate trading halts and circuit breakers, and put in place safeguards for their systems. Automated market makers and liquidity pools may support approved trading, but their use would sit within those requirements rather than operate as independent, permissionless pools.
Tokenization is being tested as a market-infrastructure tool
Atkins said tokenization could lower costs in securities issuance, trading, transfers, settlement, and ownership recordkeeping. In his remarks, he also described the technology as a potential tool for real-time securities inventory management, a function that could reduce operational frictions between brokers, custodians, clearing firms, and other market intermediaries.
Tokenized settlement could reduce the time between a trade and final transfer of ownership. Traditional U.S. equities already moved to a one-business-day settlement cycle in 2024, but blockchain systems can theoretically update records more rapidly if the legal, custody, funding, and clearing arrangements are built around the same process.
The SEC’s decision does not authorize unrestricted 24-hour trading in all U.S. stocks. Its caps, access restrictions, and issuer opt-out provisions make the program narrower than the always-open markets common in crypto. Yet it creates a regulated setting in which firms can test whether tokenized shares and blockchain-based liquidity systems can operate without weakening market oversight.
Robinhood Markets chief executive Vlad Tenev said the SEC approval marks the arrival of tokenization in U.S. markets. Tenev pointed to instant settlement, 24-hour availability, and fractional share trading as features that blockchain-based equities systems could support. Robinhood Crypto separately said its Robinhood Chain had surpassed 750 million cumulative transactions, though the SEC exemption applies to specialized regulated securities venues rather than automatically authorizing every blockchain network to list tokenized stocks.
Extended-hours equities trading is moving in parallel
The SEC’s pilot arrives as U.S. market infrastructure prepares for substantially longer stock-trading hours. Atkins said the agency is proceeding with preparations for expanded equities trading schedules, while the Depository Trust & Clearing Corporation has launched a “23×5” trade-capture service intended to support overnight clearing and settlement operations.
Industry participants have also developed overnight price bands and other risk controls, while securities information processors are preparing to distribute overnight market data, according to Atkins. Those steps address one of the practical constraints of longer trading hours: markets need reliable price information and coordinated volatility controls even when activity is thin.
SEC Commissioner Hester M. Peirce warned that overnight trading currently represents less than 1% of total NMS stock volume and is concentrated in relatively few tickers. In remarks on the trend toward a 23-hour, five-day market, Peirce raised questions about best execution, wider spreads, issuer disclosure obligations, and the burden on smaller listed companies.
Thin overnight liquidity can make a stock appear tradable while producing higher execution costs or sharper price moves for smaller orders. Tokenized trading venues would face similar challenges if they seek to offer around-the-clock access, particularly where liquidity pools replace conventional order books or operate alongside them.
Higher rates could lift demand for tokenized cash products
The tokenized-equities initiative comes as issuers of on-chain cash-management products seek to benefit from higher interest rates. Grayscale, in a Sept. 17 note, characterized the Federal Reserve’s latest 25-basis-point increase in its target range to 3.75%–4% as a “mid-cycle adjustment,” rather than a return to the 2022–2023 tightening campaign.
Grayscale said higher rates tend to increase income earned on stablecoin reserves and could make tokenized bonds and money market funds more attractive. Those products offer blockchain-based settlement and transfer features while deriving returns from conventional short-term assets, mainly government securities and cash instruments.
MoonPay said it will work with WisdomTree to widen U.S. access to the WisdomTree Treasury Money Market Digital Fund, known as WTGXX. MoonPay said the fund has about $1.2 billion under management and that it plans to incorporate the product into its stablecoin reserve-management framework for enterprise clients. WTGXX is structured to maintain a $1 net asset value per share.
The SEC’s tokenized-stock pilot and the expansion of tokenized money-market products address different parts of finance, but both depend on the same question now confronting U.S. regulators: whether blockchain rails can handle regulated assets with the safeguards expected in conventional markets. The exemption gives the SEC a limited environment to test that proposition before deciding whether tokenized equities deserve a permanent place in U.S. market structure.
For deeper context on regulated tokenized equities, explore our guide on tokenized equities and their market impact.
Disclaimer: The content on this page is provided for general informational purposes only and does not represent the views or financial advice of Toobit. We make no guarantees regarding the accuracy or completeness of this information and shall not be held liable for any errors, omissions, or outcomes resulting from its use. Investing in digital assets involves risk; users should independently evaluate their financial situation and the risks involved. For further details, please consult our Terms of Service and Risk Disclosure.
