SEC Commissioner Proposes Cautious Approach to "Innovation Exemption" for Tokenized Securities and Raises Key Issues Regarding Disclosure Systems

Odaily According to an article by Hester M. Peirce, Commissioner of the U.S. Securities and Exchange Commission (SEC), research has commenced on an "innovation exemption" scheme for tokenized securities. This scheme would allow limited-scope trading and technological experimentation for certain tokenized securities. The proposed exemption would be more cautious than the industry's suggested "blanket exemption." She believes it is necessary to explore whether, within the innovation exemption framework, experimentation with different models of tokenizing securities should be permitted. Additionally, consideration should be given to whether issuer consent is required for third parties to issue tokenized versions of their stocks. This approach aims to foster technological innovation while avoiding regulatory arbitrage and maintaining core investor protection mechanisms.

Hester M. Peirce also emphasized that regulators should not excessively interfere with private capital allocation. The SEC is currently evaluating several key issues, including: whether the existing disclosure system adequately covers the ownership structure of tokenized securities; the disclosure obligations of brokers and clearing agencies in the issuance of tokenized security interests; the compatibility of atomic settlement with the current T+1 settlement rules; and the applicability of regulatory authority in structures without intermediaries or with new types of intermediaries.