American stock markets could be in for a major transformation as the Securities and Exchange Commission prepares to release a new policy that would open the door for crypto companies to offer blockchain-based versions of traditional stocks, according to analysts and legal experts.
These so-called tokenized stocks are digital instruments built on blockchain technology that mirror the value of regular equities. Proponents in the crypto industry argue they could fundamentally change how stock markets work — enabling trading around the clock, settling transactions instantly, improving liquidity, and cutting down on costs.
Industry insiders are expecting SEC Chair Paul Atkins, appointed by President Donald Trump, to announce what’s being called an “innovation exemption” in the near future. Atkins has described the exemption as a way for companies to test out new digital asset business models without needing to follow all of the SEC’s standard disclosure and investor-protection requirements. Most significantly, the exemption is expected to let firms offer trading in tokenized versions of existing U.S. stocks.
Crypto Exchanges Gearing Up
Several major names in the crypto world have already signaled their intentions. Coinbase has indicated it plans to launch tokenized stocks in the United States once regulations permit. Meanwhile, Robinhood, Kraken, and other crypto exchanges are already offering these products in markets outside the U.S. Coinbase announced on Tuesday that it would soon be launching similar offerings internationally.
While Atkins has described the innovation exemption as temporary and limited in scope, analysts and attorneys say it could set the stage for lasting structural changes to equity markets over the long haul. It could put crypto firms in direct competition with established brokerages. Some regulatory experts and traditional financial institutions have cautioned that tokenized stock trading could introduce new risks to the financial system and to everyday investors, depending on how the exemption is ultimately structured.
The overall value of tokenized public stocks aimed at retail investors has surged dramatically. At the end of 2024, the market was worth just a few million dollars, according to RWA.xyz, a firm that tracks tokenized assets. Today, that market capitalization has climbed to more than $6.4 billion, according to data provider CoinMarketCap.
Ladan Stewart, global head of fintech and a partner at the law firm White & Case, called the innovation exemption a “significant win” for the crypto industry. She noted it could potentially allow crypto firms to handle multiple stock market functions at once — such as trade execution and clearing — without having to comply with the full rulebook that applies to SEC-registered intermediaries like exchanges and broker-dealers.
The SEC declined to offer any comment on the matter.
Concerns About Investor Safety and Market Stability
The innovation exemption fits into a broader reversal of SEC crypto policy under the Trump administration. During his campaign, President Trump actively courted support from the crypto industry by promising to roll back the crackdown that had taken place under the previous administration.
Atkins has also signaled that the agency is working on a proposed rule that would create a safe harbor allowing certain crypto companies to raise capital without adhering to traditional securities offering requirements. Analysts say both policy efforts have grown more urgent as the timeline for Congress to pass major crypto legislation continues to shrink.
Not everyone is on board, however. Several prominent Wall Street firms and industry organizations, including Citadel Securities and the Securities Industry and Financial Markets Association, have come out against the innovation exemption. They argue that changes of this magnitude should not be made on a case-by-case basis and should instead go through a formal rule-change process.
Atkins acknowledged last month that, beyond the innovation exemption, the SEC may also pursue a formal rulemaking process.
Citadel Securities previously raised concerns with the SEC that tokenization could pull liquidity away from public markets. Both Citadel Securities and the Securities Industry and Financial Markets Association declined to comment for this report.
Legal and regulatory experts have also flagged potential dangers for investors. Most tokenized stocks are tied to publicly traded companies and issued by outside parties. Some are backed one-to-one by actual shares, while others provide exposure through financial derivatives. Although many are marketed similarly to traditional stocks, they don’t always come with the same rights, disclosures, and legal protections that standard equities carry.
SEC Commissioner Hester Peirce addressed some of those concerns in a social media post last month, indicating she expects the innovation exemption would only apply to tokenized stocks that provide investors with the same rights and protections as conventional equities. Peirce declined to comment further.
