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Here we go: the tokenization exemption
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WHAT I’M WATCHING
Here we go: the tokenization exemption
Yesterday, the US Securities and Exchange Commission (SEC) dropped the document we’ve been waiting for.
Known as the Innovation Exemption, it gives time-limited exemptions to permit the legal onchain trading of US stocks.
It does so by defining a type of entity known as “tokenized securities venues” (TSVs) – these trade tokenized stocks using permissioned automated market maker (AMM) liquidity pools, and they set standards for participant access.
The order creates an exemption for TSVs, which will not be considered “exchanges” under the Securities Exchange Act of 1934. It also exempts liquidity providers that supply tokens to the AMMs from being considered “dealers” under the Act.
(I’ve seen some people ask if a TSV could trade tokenized stocks without an AMM and still be considered exempt – the answer is another question: why would they want to? For intermediated trading, the traditional market system works well.)
There are limits on the range and number of different tokens that can be traded on a single venue as well as caps on volumes, presumably to minimize liquidity risk and set the stage for a gradual migration.
