SEC Explores Innovation Exemption to Boost Asset Tokenization

The Securities and Exchange Commission (SEC) is actively exploring the possibility of implementing an innovation exemption to foster the growth of asset tokenization. SEC Chair, Paul Atkins, revealed that the agency's staff is currently considering various regulatory changes to incentivize tokenization within the existing framework. This move comes in the wake of the House passing the GENIUS Act, a significant stablecoin bill, which Atkins welcomed as a step towards providing clearer guidance for the digital asset industry.

Atkins emphasized that the SEC is looking into rule alterations that would allow for new trading methods and more targeted exemptions. These changes aim to support the development of a broader tokenized securities infrastructure. Several financial institutions have already expressed interest in tokenizing major US stocks, and some have even hinted at developing tokenized products for private firms. Atkins believes that the shift of assets onto blockchain rails is inevitable, stating, “So if it can be tokenized, it will be tokenized.”

In addition to the innovation exemption, Atkins also highlighted the recently approved stablecoin bill as a “historic step” towards establishing the US as a global leader in crypto. He expressed his anticipation for the market to leverage the legislation while maintaining robust risk standards. The bill stipulates that firms will hold equivalent dollar reserves in short-term government bonds or similar assets subject to state or federal oversight. It is expected to be signed into law by the end of the week.

Atkins has charted a different course on crypto compared to his predecessor, Gary Gensler. Gensler's approach was criticized for attempting to govern the sector through enforcement. Atkins has expressed his intention to unwind key Gensler-era policies, including the rule allowing brokers to act as digital asset custodians. He aims to make it easier to register crypto assets by clarifying securities rules and providing more choices for managing and storing customer assets. The commission is also set to reexamine and define the criteria for “qualified custodians,” granting exemptions from current custody requirements to align with industry practices.

Furthermore, Atkins supports an overhaul of the framework governing special-purpose broker-dealers. He advocates for allowing registered firms to trade a broader mix of securities and non-securities assets on their platforms. Atkins also emphasized the need for the agency to work on replacing existing rules with ones that could last for years, asserting that the SEC can proceed without waiting for Congress to approve laws.