Jamie Selway, Director of the Trading and Markets Division of the U.S. Securities and Exchange Commission (SEC), stated that asset tokenization and cryptocurrency have been politicized, but the development of these markets should receive bipartisan support from both Democrats and Republicans. He emphasized, "We want this country to win the tokenization competition."

Selway's remarks come in the wake of a setback for cryptocurrency legislation in Congress. The crypto market structure bill, the CLARITY Act, received only 49 votes in a procedural vote in the Senate, falling short of the 60 votes needed to advance. Republicans accused Democrats of deliberately delaying, while some lawmakers expressed concerns about members of the Trump family profiting from crypto projects; both Trump and the White House denied any conflict of interest. The bill was intended to delineate the regulatory boundaries between the SEC and the Commodity Futures Trading Commission (CFTC) regarding securities, commodities, and stablecoins.

The day after the legislative failure, the SEC exercised its administrative exemption authority to issue an "innovation exemption," allowing tokenized U.S. National Market System stocks (NMS stocks) to trade on-chain in secondary markets for a trial period of five years. SEC Chairman Paul Atkins stated that although Congress failed to advance the CLARITY Act, the SEC is taking significant steps "within its statutory authority." Selway described this approval as an "important milestone" in opening capital markets.

The exemption created a new type of trading venue called a "Tokenized Securities Trading Venue" (TSV). These venues do not need to register as national securities exchanges and can facilitate trades using smart contracts, automated market makers (AMMs), and software-managed liquidity pools, replacing traditional order books. Trading software must be open, auditable, and deployed on a public permissionless blockchain, but access to the trading venue requires permission. Tokenized stocks must have the same voting rights and dividend rights as the original stocks; if trading of the original market is paused, the tokenized version automatically pauses as well; synthetic products that only track prices are excluded from the exemption; and the use of leverage and borrowing in trades is prohibited.

In terms of scale, the exemption sets strict tiered limits. The first tier includes the most liquid stocks, with a maximum of 75 stocks per trading venue and a trading volume limit of 0.25% of the stock's average daily trading volume. For Tesla, with an average daily volume of about 40 million shares, approximately 100,000 tokenized shares could be traded daily. The second tier allows for a maximum of 250 stocks, with a trading volume limit of 2.5% of the average daily volume. Companies whose stocks are tokenized by third parties will receive a 30-day notice and have the right to veto the listing on a particular trading venue. Some institutions providing liquidity for AMMs may be conditionally exempt from dealer registration requirements.

Selway established the principle for SEC's tokenization regulation as "innovation without arbitrage": tokenized securities are subject to the same rules as traditional securities, receiving neither special privileges nor additional penalties. He previously proposed coordinating rules with the CFTC in three areas: swap reporting, portfolio margining, and product definitions. Meanwhile, CFTC Chairman Mike Selig also stated that he would continue to advance crypto policy using existing powers.

From a market mechanism perspective, this is a policy-driven event, shifting the regulatory path from "waiting for Congress to legislate" to "regulatory agencies advancing through administrative exemptions first." The direct beneficiaries are institutions preparing to establish on-chain stock trading venues: Robinhood and Kraken, which have already tested tokenized stocks in Europe, as well as tokenization infrastructure providers like Coinbase, Securitize, Ondo, and Nasdaq, which is laying out on-chain settlement with the U.S. Securities and Exchange Commission (DTCC). In terms of funding, U.S. stock market liquidity is expected to partially migrate to a 24/7 on-chain market, but strict trading volume limits mean early scale will be limited. Offshore platforms relying on synthetic tokenized stocks to serve overseas users are under pressure, as synthetic products are excluded; at the same time, the exemption relies on administrative power rather than law, posing a political risk of being revoked if the SEC leadership changes in the future.

Source: Public Information