SEC delays tokenized stock exemption after exchanges raise ownership concerns

The U.S. Securities and Exchange Commission has reportedly delayed plans to introduce a proposed exemption for tokenized stock trading after exchanges and market participants raised concerns over investor protections and how blockchain-based ownership would function in practice.

According to a Bloomberg report published Friday, SEC staff had already reviewed a draft framework tied to the agency’s proposed “innovation exemption,” which was expected to be released earlier this week before discussions slowed.

People familiar with the matter told Bloomberg that feedback from stock exchange officials and other market participants centered on whether tokenized equities could preserve the same legal and economic rights attached to traditional shares. 

Questions were also raised over how ownership records would be verified on semi-pseudonymous blockchains and whether unauthorized firms could issue stock-linked tokens without approval from the underlying public companies.

Under the proposal reviewed by the SEC, platforms offering tokenized equities would need to ensure investors retain rights typically associated with common stock, including dividend access and shareholder voting privileges.

Earlier in the week, SEC Commissioner Hester Peirce had already signaled

 that any exemption under consideration would likely remain narrow in scope. 

In comments posted to X on Thursday, Peirce said she expected the framework to support only “digital representations” of equity securities that already trade in public secondary markets.

SEC discussions narrow focus to issuer-backed equities

At the same time, the latest delay has drawn support from several crypto industry executives who argued that the SEC should avoid rushing a framework for tokenized securities.

Carlos Domingo, the CEO of tokenization platform Securitize, wrote on X that regulators should ensure the exemption “applies to the right instruments,” adding that delaying the proposal would be preferable to introducing rules that create operational or legal problems.

Separately, Tom Farley, the CEO of crypto exchange Bullish, said on X that the SEC appeared to be recognizing that only public companies themselves should be permitted to issue blockchain-based versions of their shares.

Behind the discussions, the SEC has continued drawing a distinction between different forms of tokenized securities. In guidance released in January, the agency classified such products into “custodial” and “synthetic” categories.

Custodial tokenized securities are issuer-backed shares held through regulated intermediaries and provide investors with shareholder rights tied to the underlying stock. Synthetic tokenized securities, by contrast, only offer price exposure to equities without transferring ownership of the underlying shares.

Growing interest in tokenization from Wall Street firms and crypto companies has coincided with the SEC taking a more crypto-friendly stance under the Trump administration. Data from RWA.xyz shows that tokenized real-world assets have reached roughly $34 billion, including about $1.55 billion tied to tokenized equities.

Total RWA market value. Source: RWA.xyz

Despite that growth, adoption has remained below earlier industry projections. According to a McKinsey & Company report published in 2024 tokenization could grow into a multi-trillion-dollar market by the end of the decade.