Summary
The SEC is again delaying its "innovation exemption" for tokenized securities amid concerns from the White House and Wall Street. The White House fears it could complicate Digital Asset Market Clarity Act negotiations, while SIFMA argues market-structure changes should go through formal rulemaking, not exemptions. The proposal would have eased regulatory hurdles for issuing and trading tokenized securities on blockchain rails, but questions persist over how blockchain venues fit into equity market rules (best execution, Reg NMS, Order Protection Rule).
Key Points
- SEC to further delay the "innovation exemption" for tokenized securities
- Expected to be released in part as soon as Friday; commission canceled its Friday meeting
- White House concern: could "kick a hornet's nest" amid Clarity Act negotiations
- SIFMA among main groups halting the initiative; prefers formal notice-and-comment
- Concern: brokers' best-execution obligations under Regulation NMS for tokenized venues/AMMs
- In June, SEC proposed eliminating Rule 611 (Order Protection Rule) of Reg NMS
- Not the first delay: SEC seemed ready in May 2026 after repeated pushbacks
- Earlier concern: exemption might allow synthetic security tokens (issuers worried); Hester Peirce expects only tokens representing the same underlying security
- Tokenization momentum: Nasdaq, NYSE testing infrastructure; DTCC processed first live production tokenized trades last month
- Citi projects tokenized assets could reach $5.5 trillion by 2030
- SEC under Atkins signals support for tokenization as market modernization