SIFMA Urges SEC to Reject Private Exemptions for Tokenized Equities

The Securities Industry and Financial Markets Association (SIFMA) has urged the Securities and Exchange Commission (SEC) to reject private exemptions that could allow digital asset companies to launch tokenized equities without broader public input. SIFMA argues that such decisions should undergo a formal, transparent process, warning that approving new trading models without industry-wide consultation poses serious risks.

The concern arises from reports that some crypto firms, including major exchanges, are seeking to launch tokenized versions of stocks using SEC no-action relief. This process involves the agency agreeing not to pursue enforcement without officially endorsing the activity. SIFMA emphasizes that tokenized equities raise major questions around regulation, investor protections, and oversight, which cannot be resolved through private exemptions. The group insists that a public framework is necessary to ensure accountability and market integrity.

As the SEC’s new Crypto Task Force explores tokenization and crypto ETFs, internal discussions are reportedly underway to develop a streamlined approval system. This could result in a new generic listing standard for crypto ETFs, potentially eliminating the need for the complex 19b-4 filing process. Analysts believe the SEC is moving quickly to finalize a new framework ahead of expected deadlines later this year. However, SIFMA’s pushback signals rising tensions between traditional finance and emerging digital asset strategies, as both sides compete to shape the future of regulated tokenized securities.

A major Wall Street lobbying group has called on U.S. regulators to cease the silent approval of blockchain-based stock offerings by cryptocurrency firms. This pushback comes as several crypto companies have been seeking approval to offer tokenized stocks, which are digital representations of traditional securities on a blockchain. The lobbying group argues that these approvals have been granted without sufficient public scrutiny or regulatory oversight, raising concerns about potential risks to investors and the broader financial system.

The group's concerns are not unfounded. Tokenized stocks, while innovative, present unique challenges. For one, they blur the lines between traditional securities and cryptocurrencies, which are subject to different regulatory frameworks. Additionally, the decentralized nature of blockchain technology can make it difficult to enforce securities laws and protect investors. The lobbying group is urging the SEC to establish clear guidelines for the approval and regulation of tokenized stocks, and to ensure that any approvals are made transparently and with adequate public input.

The pushback from the Wall Street lobbying group comes as several high-profile companies have expressed interest in tokenized stocks. Coinbase, for instance, has formally requested approval from the SEC to offer tokenized stocks, signaling that mainstream exchanges are serious about this innovation. However, the lobbying group's concerns highlight the need for caution and careful regulation as this technology continues to evolve.

The debate over tokenized stocks is part of a broader conversation about the role of blockchain technology in the financial industry. While some see it as a disruptive force that could revolutionize the way securities are traded, others are more cautious, pointing to the potential risks and challenges. The lobbying group's pushback is a reminder that, as with any new technology, it is important to proceed with care and to ensure that adequate safeguards are in place to protect investors and the broader financial system.