U.S. Securities and Exchange Commission (SEC) Commissioner Hester Peirce announced that the SEC is considering a conditional exemption order to allow companies to use distributed ledger technology (DLT) for issuing, trading, and settling tokenized securities. This initiative was revealed during the 31st International Securities Market Growth and Development Institute. Peirce highlighted the need to modernize regulatory frameworks to foster innovation while maintaining investor protection. The exemption would let firms operate in a controlled 'sandbox' environment—similar to international practices—where new trading systems and technologies can be tested under SEC oversight.
Tokenization, which re-formats traditional assets like stocks and bonds as blockchain-based cryptocurrency assets, has been limited in adoption due to regulatory uncertainty. Peirce believes that a conditional exemption could help break this impasse by giving firms regulatory relief, provided standards on anti-fraud, recordkeeping, and risk disclosure are still met. Additional rules may apply to custody and trading limits. Peirce also called for international regulatory collaboration to support innovation across global capital markets. The SEC's plan is not yet finalized and is pending industry feedback.
