U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce announced that the agency is exploring a potential exemption order that would allow companies to use distributed ledger technology (DLT) to issue, trade and settle tokenized securities.
The announcement was made on the penultimate day of the SEC's 31st International Securities Market Growth and Development Institute.
Commissioner Peirce said it was important to modernise regulatory frameworks to accommodate innovation without compromising investor protection. The proposed exemption would allow companies to operate in a controlled environment, similar to international “regulatory sandboxes”, to test new trading systems and technologies.
Tokenization, which involves formatting traditional securities like stocks and bonds as cryptocurrency assets on a blockchain, is a key focus area for the SEC’s evolving crypto oversight. According to Peirce, limited trading venues and regulatory uncertainty have discouraged the wider adoption of tokenized securities. A conditional exemption could break this cycle and provide regulatory relief to firms while ensuring market integrity and risk disclosure.
Such exemptions could still require firms to adhere to anti-fraud standards, maintain records, and undergo SEC oversight. Additional requirements could be placed on custody services and trading limits to mitigate risks. Successful implementation by firms could lead to increased flexibility over time, Peirce said.
Calling for both local innovation and international collaboration, Peirce encouraged global regulators to collaborate on cross-border sandbox initiatives. “Regulatory balancing act is not a solitary exercise,” Peirce said, touting the benefits of coordinated innovation to strengthen global capital markets.
The SEC has not yet formalized the exemption and is awaiting feedback from industry stakeholders as it considers next steps.
*This is not investment advice.
