SEC announces possible exemption for trading in tokenised shares

The US Securities and Exchange Commission (SEC) is poised to take two major steps in cryptocurrency regulation. That is according to Bloomberg, citing insiders. On Friday, the regulator will hold a public meeting at which it may present a so-called “innovation exemption” for tokenised securities.

In brief:

• The SEC may present an exemption on Friday for trading tokenised shares via the blockchain.
• Companies may gain the right to object to tokenisation of their shares by third parties.
• The plans include stricter anti-money laundering measures, including a possible requirement that trading platforms be based in the US.

Trading shares via the blockchain, day and night

If the exemption goes ahead, it would open the door to trading shares via the blockchain, seven days a week and twenty-four hours a day. That is a significant change from the traditional stock market, which is bound by fixed trading hours. In addition to this exemption, the SEC is also considering a separate regulatory regime for certain investment contracts involving crypto assets.

Brett Redfearn, chairman of tokenisation company Securitize and former head of the trading and markets division at the SEC, says his company has long argued that issuing companies should retain control over how their own shares are tokenised. Under the plans, companies would indeed be given the option to object if a third party wants to convert their shares into tokens.

Stricter rules against money laundering and foreign loopholes

One of the concerns surrounding tokenised shares is that bad actors outside the US could exploit gaps in the blockchain to circumvent oversight. To counter this, the new plans are expected to include additional anti-money laundering measures. One such measure would be a requirement that platforms trading digital tokens be registered as US legal entities.

The timing of the announcement is no coincidence: the Clarity Act, legislation intended to establish crypto regulation in the US on a broader scale, is facing delays. The SEC does not appear willing to wait for it and is taking the initiative itself to provide clarity for the sector.