The U.S. Securities and Exchange Commission (SEC) has delayed a proposal that could have allowed crypto firms to more easily offer tokenized versions of publicly traded stocks, following concerns raised by regulators, exchanges, and market participants.
According to a Bloomberg report, SEC staff had prepared a draft “innovation exemption” framework that could have been released this week. The proposal would have created broad exemptions for certain tokenized equity products tied to traditional stocks.
However, the rollout has now been pushed back as the agency reviews feedback from stock exchange officials and industry participants who recently met with SEC staff to discuss the plan.
Concerns center on third-party tokens
One of the main issues under discussion involves so-called third-party tokenized stocks, blockchain-based versions of equities issued without direct involvement or approval from the public companies whose shares they represent.
Several former regulators and market structure experts said the proposal raises unresolved questions about shareholder rights, dividend payments, and voting procedures if tokenized equities trade across blockchain networks outside traditional market infrastructure. Under the draft framework, firms issuing tokenized stocks would reportedly need to ensure token holders receive the same economic rights as conventional shareholders, including dividends and voting access.
However, critics argue that fulfilling those obligations could become difficult when tokens move through pseudonymous blockchain wallets rather than regulated brokerage systems.
Amanda Fischer, who previously served at the SEC during the Biden administration, said public companies could face operational uncertainty if tokenized shares proliferate outside established shareholder tracking systems. “If I was a corporate executive, I’d be very concerned about the implications,” Fischer said.
SEC officials signal caution
Not all SEC officials are reportedly aligned on whether third-party tokenized stocks should be permitted under the exemption. Hester Peirce, who is often viewed as supportive of digital asset innovation, suggested that any exemption would likely remain narrow in scope.
In a post on X, Peirce said she expects the framework would only facilitate trading of “digital representations of the same underlying equity security that an investor could purchase in the secondary market today.”
Her comments appeared to indicate caution toward broader token issuance models that operate independently from the companies behind the stocks. The SEC has not formally changed or withdrawn the draft proposal, according to people familiar with the discussions.
Regulatory and security risks emerge
Some experts also warned that tokenized equities could introduce new compliance and sanctions risks if traded on platforms with weaker identity verification standards.
Austin Campbell said blockchain-based securities trading could make it harder to determine who ultimately owns tokenized assets, especially if platforms lack strict Know-Your-Customer controls. “You can’t pay a dividend when you don’t know who owns the token,” Campbell said, warning that sanctioned entities could potentially gain exposure through offshore crypto platforms.
The concerns come as regulators globally examine how tokenized financial products fit within existing securities laws and anti-money laundering requirements.
The SEC’s delay suggests regulators are still weighing whether existing securities frameworks can support tokenized stock markets without creating new legal, operational, or compliance risks.
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