TL;DR
- The SEC's innovation exemption for tokenized stocks could be released as soon as this week, per a Bloomberg report
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The exemption lets institutions offer, on an experimental basis, a new token based way to invest in stocks
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A huge contrast to the regulate-by-litigation strategy of former SEC chair Gensler. Atkins is doing the opposite
A Bloomberg report states that the SEC’s innovation exemption for tokenized stocks could be released as soon as this week. The exemption would allow for institutions to offer, on an experimental basis, a new, token based, way to invest in stocks.
This is a huge contrast to the regulate-by-litigation strategy employed by former SEC chair Gensler. Rather than suing pretty much everyone in order to let the courts figure out what’s right, the SEC under Atkins is acting practically in the opposite way. Regulate-by-experiment.
If the innovation exemption becomes federal rule, we could see all sorts of tokenized stock offerings from both traditional finance and major crypto exchanges, such as Coinbase.
The big upside with offering tokenized stock trading is the low cost and high speed of execution in the on-chain transactions. Additionally, a tokenized market could operate 24/7, giving investors much better liquidity and more flexibility.
What Tokenized Stocks Could Look Like
The tokenized stocks could be both price trackers, meaning you’d buy a token tracking for example AAPL, but without actually having an ownership in the company, it would just track the stock value. This way, the issuer wouldn’t need permission from Apple to offer trading in the company.
It could also, possibly, allow for direct ownership if the company backing the asset is on board. Much like how shares work today. But with the added benefit of near instant settlement, lower transaction costs and a 24h open market.
This is not the first initiative to advance tokenized stock trading. Wall Street and the DTCC, which clears most American securities transactions, are set to start offering tokenized securities on an experimental basis. This new rule would let the crypto exchanges in on it, in their own way.
