SEC Issues Order Granting Relief to Tokenized Securities Venues

On September 17 the Securities and Exchange Commission (SEC) granted temporary, conditional relief to Tokenized Securities Venues (TSVs) which bring together buyers and sellers of tokenized National Market System (NMS) stock by providing liquidity and setting standards. The temporary relief will facilitate “onchain” trading of certain tokenized stocks. According to an SEC fact sheet, “TSVs and the use of distributed ledger technology can offer several benefits to market participants, including enabling investor self-custody, around-the-clock trading, fractional ownership of shares, and near instantaneous settlement, while improving efficiencies and providing greater transparency.” While there are several conditions attached to the exemptive relief, according to a Dechert LLP client alert, "importantly for ETF sponsors, the order gives an underlying issuer an opportunity to prevent unaffiliated third-party tokenization of its securities by objecting within 30 days of receiving notice.”

In a statement supporting the relief SEC Chair Paul Atkins stated “the Securities and Exchange Commission is taking a significant step forward, within its statutory authority, to bring America’s capital markets into the digital age by facilitating onchain trading of certain tokenized stocks through the ‘Innovation Exemption...” He further noted that the Commission invites public feedback on the Innovation Exemption as the staff contemplate further regulatory changes. The temporary relief order is set to expire after five years.

Click here to read the SEC press released covering the temporary exemptive relief.

Click here to view the SEC’s fact sheet covering the relief.

Click here to view a client alert from Dechert LLP.