SEC Considers Tokenization Exemption — Here’s Why It’s a Big Deal
The SEC might finally be opening the door for tokenization to go mainstream in the U.S.
In a speech this week, Commissioner Hester Peirce said the SEC is exploring a potential exemptive order that would allow firms to issue, trade, and settle securities using blockchain technology — without jumping through all the usual regulatory hoops.
That’s a big shift.
For years, companies have hesitated to get into tokenized securities because of how expensive and complex it is to register as a broker-dealer, exchange, or clearing agency — especially when there isn’t much of a secondary market yet. It’s a classic chicken-and-egg problem: the market won’t grow until regulation allows it, but regulators won’t move until the market grows.
Peirce wants to break that cycle.
“It also would afford the SEC time to develop and adopt durable adaptations to its existing rules to accommodate DLT,” she said, referring to distributed ledger technology.
What’s Actually Being Proposed?
Think of it like a regulatory sandbox — something other countries have already tried. Instead of forcing every startup to comply with rules built for the 1970s, this sandbox would give firms a chance to safely test out blockchain-based systems, with temporary exemptions from some requirements, as long as they follow certain conditions.
That includes things like, keeping good records, being transparent about custody, explaining how their smart contracts work, having enough capital, making fair and accurate disclosures and submitting to SEC oversight.
In short, this isn’t a free-for-all. But it could finally give U.S. firms the breathing room they need to experiment with tokenized stocks, bonds, and other securities without spending millions upfront just to get started.
Learning from Global Sandboxes
Peirce pointed out that the U.S. is learning from other countries already running similar programs. The EU has its DLT Pilot Regime, though it hasn’t seen much adoption yet — partly because it’s too restrictive.
The UK’s Digital Securities Sandbox (DSS) is taking a smarter approach, with flexible volume limits depending on a firm’s experience. Hong Kong and Singapore also have active tokenization programs, though they tend to favor traditional finance players.
Peirce said the SEC might try something similar here — possibly even in collaboration with the UK — and she made a point to include startups and automated market makers in the mix, not just Wall Street giants.“The goal is to formulate a commercially feasible approach that protects investors, including by ensuring that they have the benefit of cutting-edge technologies for trading, clearing, and settling securities,” Peirce added.
Why This Matters Now
We’re in the middle of a tokenization boom. From real estate and treasury bonds to AI data and even chocolate Easter eggs, everyone’s talking about putting real-world assets on the blockchain. But the U.S. has been behind the curve, with firms like BlackRock and JPMorgan building tokenized products — mostly overseas.
This exemptive order could change that.
If the SEC greenlights a sandbox-style approach, it could unlock a wave of innovation in U.S. capital markets — letting small and large players alike build faster, cheaper, and more transparent financial infrastructure.
And the timing couldn’t be better. The SEC is holding a Tokenization Roundtable on May 12, where Peirce is expected to get plenty of feedback from both TradFi and DeFi experts.
And TokenFi?
TokenFi, which aims to simplify tokenization for everyone — not just institutions — could be the biggest winner. TokenFi’s upcoming RWA tokenization module wants small businesses or solo developers could start creating and trading tokenized financial instruments with just a few clicks.
