Key Highlights
- The SEC’s planned “innovation exemption” for tokenization has reportedly been delayed again, with details expected to remain undisclosed for now.
- The delay may be linked to negotiations over Section 10505 of the CLARITY Act, which addresses how tokenized securities should be regulated.
- The SEC will still hold an open meeting on August 14 at 10 a.m. ET to consider separate rules for crypto fundraising and investment contracts.
The U.S. Securities and Exchange Commission’s planned innovation exemption for tokenization has reportedly been delayed again, potentially pushing back a regulatory framework expected to give firms more room to experiment with tokenized securities.
Crypto journalist Eleanor Terrett reported Thursday, that she has been told that details of the exemption are expected to remain “under wraps” for the time being. Part of the reason could be continuing negotiations around the tokenization provisions of the CLARITY Act.
The SEC’s official agenda for its August 14 open meeting at 10 a.m. ET currently lists a proposal for a “tailored offering regime” covering certain investment contracts involving crypto assets. The published agenda does not separately list the tokenization innovation exemption.
CLARITY Act Section 10505 complicates SEC tokenization plan
Section 10505 of the latest Senate CLARITY Act text deals directly with the tokenization of securities, creating an overlap between congressional negotiations and the SEC’s own tokenization plans.
The Senate Banking and Agriculture committees’ July 22 section-by-section summary states that tokenized securities would remain securities for regulatory purposes. It also directs the SEC to study their treatment, including custody requirements, consumer protection, cross-border issues and coordination between regulators.
The provision further says tokenized securities should generally receive the same regulatory treatment as the securities they represent, subject to the SEC’s existing authority.
Terrett’s X post suggests SEC officials may be reluctant to unveil an exemption while lawmakers are still negotiating those provisions, since a separate agency framework could alter the balance reached between senators and other stakeholders.
The connection has not been formally stated by the SEC, and the reported reason for the latest delay comes from an unnamed source.
SEC innovation exemption has already faced delays
The SEC has been working on the innovation exemption for months under Chairman Paul Atkins, who remains the agency’s chair.
The framework has been expected to provide limited regulatory relief for firms testing blockchain-based financial products, including tokenized versions of U.S. equities. The Crypto Times previously reported in May that the proposal could create a pathway for tokenized stocks to trade through crypto-native infrastructure, including potential decentralized platforms.
The SEC subsequently delayed the proposal in May while considering feedback from stock exchanges and other market participants. Questions included how shareholder rights would apply to tokenized equities and whether third parties should be allowed to create tokens referencing public-company shares without the companies’ consent.
By June, the exemption was still being prepared, with expectations that could allow firms to experiment with tokenized stock trading without complying with every requirement normally imposed on registered exchanges and broker-dealers, although its final scope had yet to be determined.
Commissioner Hester Peirce had also indicated that any exemption would likely be limited rather than a blanket carve-out from securities regulation.
SEC will still move ahead with crypto fundraising proposal
The reported tokenization delay does not mean Friday’s SEC crypto meeting has been canceled.
The Commission is scheduled to consider whether to propose new rules establishing a tailored offering framework for certain investment contracts involving crypto assets. The item will be handled by the Division of Corporation Finance.
That proposal is distinct from the innovation exemption for tokenized securities and could address how crypto projects raise capital while remaining subject to federal securities rules.
The two initiatives had increasingly been viewed as parallel components of the SEC’s broader crypto regulatory agenda as the CLARITY Act remained stalled in Congress. Recent reporting had suggested the innovation exemption could also be disclosed around Friday’s meeting, but the latest report indicates the tokenization portion may now stay on hold.
With Section 10505 still part of the congressional negotiations, the timing of the SEC’s tokenization framework may now depend partly on whether lawmakers can settle the treatment of tokenized securities when the Senate returns to the CLARITY Act.
Also Read: As CLARITY Act Stalls, SEC Moves to Write Its Own Crypto Rules
