Wall Street is starting to adopt the machinery behind crypto trading. Tokenized shares are digital versions of public stocks that can trade on a blockchain. The shift gained momentum this week after the Securities and Exchange Commission created a temporary US framework for certain stock tokens.
The SEC opens the gate
The agency granted exemptions allowing approved venues to trade tokenized US stocks under rules that took effect immediately. The temporary framework will remain in place for five years.
The move came two days after the Clarity Act stalled in the Senate. With Congress unable to advance broader legislation, the agency is moving ahead under its existing powers.
Liquidity providers also received a five-year exemption from dealer registration requirements. The regulatory relief covers platforms that trade blockchain-based stocks and other securities.
“The Commission is not cementing today’s technology as the standard for tomorrow.”
Paul Atkins, SEC
Atkins said the temporary approach gives the market room to develop before permanent rules are established. The agency also made clear that overseas models will not automatically qualify in the US.
Shareholder rights set the line
The SEC separated genuine stock tokens from products that merely track a share’s price. Eligible stock tokens must provide the same rights as the underlying shares.
That includes dividends and voting rights, an issue that has become a major industry dispute.
Companies can also block third parties from tokenizing their shares. Trading venues must notify issuers 30 days before proceeding.
If a company objects within that period, the venue cannot move forward. Whether issuers will embrace tokenization remains one of the market’s biggest unanswered questions.
The safeguard follows a string of clashes over stock tokens sold outside the US. Robinhood Markets drew criticism from AMC Entertainment Holdings after offering tokenized exposure to the theater chain without its involvement.
Robinhood plans to answer those concerns by backing each token with an underlying share and extending voting rights to holders.
Crypto venues meet Wall Street
Crypto firms are moving closer to the center of a $75T US stock market that has long operated through traditional exchanges and brokers.
Coinbase Global plans to launch tokenized stocks once US rules permit them. Robinhood and Kraken already offer similar products overseas, while Gemini has also entered the offshore market.
The exemption could give those platforms a route into the US. It also raises the prospect of crypto exchanges competing directly with established stockbrokers.
Wall Street is not standing still. DTCC, Intercontinental Exchange, Nasdaq, and the New York Stock Exchange have spent months preparing tokenized-market infrastructure.
Qualified US investors can already buy tokenized money-market funds, private funds, and gold. Public stocks would bring the technology into a much larger and more familiar corner of the market.
The trade still has limits
The pitch is simple: stocks that trade around the clock, settle almost instantly, and cost less to move.
Tokenization could also support self-custody and create a clearer record of ownership. Investors would hold assets more directly through blockchain-based systems instead of relying entirely on brokers.
But 24/7 access does not guarantee deep markets. Trading outside regular hours could be thin, leaving prices more vulnerable to sudden swings.
The SEC included volume limits in its temporary order to contain those risks while the market develops.
Citadel Securities has pushed back against the exemption route, arguing that rules affecting investor protection and market access should face a formal public review.
The first investable winners may be the platforms running the market rather than the tokens themselves. That could put crypto exchanges into closer competition with brokerages such as Morgan Stanley’s E*Trade and Charles Schwab.
That contest will take time to form. Companies can still block their shares from being tokenized, and it remains unclear how many will allow it.
