Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
SEC Grants 5 Year Exemption for Tokenized Stocks
September 18, 2026 | NCFA Insight | Blockchain, Crypto, Digital Assets, Tokens, CBDCs, Stablecoins, Metaverse, NFTs, Capital Markets Infrastructure And Funding, Regulation And Policy, Trading And Market Structure
Real U.S. Shares Can Trade Onchain Under Strict Limits
On September 17, 2026, the U.S. Securities and Exchange Commission granted a tokenized stock exemption for five years, allowing eligible tokenized U.S. listed stocks to trade through a new category of Tokenized Securities Venue, such as permissioned automated market makers and liquidity pools without registering as national securities exchanges, provided they meet the SEC's conditions. Certain firms supplying their own capital to those pools also receive limited relief from the Exchange Act definition of dealer.
The exemption applies to tokenized National Market System (NMS) stocks that carry the same rights and privileges as the conventional shares they represent, including dividends and voting rights. A token that only follows a company's share price does not qualify, and synthetic products that provide price exposure without the same shareholder rights are excluded.
See: BGC Launches Compute Infrastructure Markets
SEC Chair Paul Atkins said the exemption is intended to help “bring America's capital markets into the digital age,” while the agency considers whether permanent rules are needed for onchain securities trading.
The relief doesn't remove existing securities law protections. Anti fraud and anti manipulation rules still apply, and tokenized trading remains connected to the underlying listed market. Investors may use different trading and settlement technology, but the security itself remains the same legal share.
The SEC Is Limiting How Far the Test Can Go
The SEC has placed firm limits on how large tokenized trading can become during the five year test.
- Tier 1 venues can offer up to 75 stocks, with trading limited to 0.25% of each stock's prior month average daily share volume
- Tier 2 expands that to 250 stocks, with tokenized trading capped at 2.5% of each stock’s normal daily trading volume
For example, if a stock normally trades 10 million shares a day, those limits would equal about 25,000 shares under Tier 1 and 250,000 under Tier 2. Repeated breaches can force a tokenized stock off the venue for three months, while trading must stop whenever the underlying listed stock is halted or suspended.
The technology also has to remain visible to regulators. Smart contracts must be publicly auditable and deployed on a public permissionless distributed ledger, even though access to the trading pool itself remains permissioned. If an unaffiliated third party wants to tokenize a company's shares, the issuer must receive at least 30 days notice before trading begins and can object to the stock being offered on the venue.
The SEC is also working on the ownership and recordkeeping side of digital securities. On September 1, it proposed updated transfer agent rules that address blockchain based records and uncertificated securities. Trading therefore forms only one part of the regulatory work. Transfer records, shareholder ownership and settlement still have to remain accurate when securities move onto distributed ledger infrastructure.
The tokenized stock market is still small compared with conventional U.S. equities. Reuters Breakingviews estimated the market at roughly US$3 billion in value and less than US$30 billion in monthly trading volume earlier this week.
The SEC says tokenization may support longer trading hours, faster settlement, fractional ownership and self custody, but those benefits still have to be demonstrated in practice. On the same day it issued the exemption, the agency also held a roundtable on 24 hour equities trading covering settlement, liquidity, cyber resilience, staffing and market data. Traditional exchanges are extending trading hours while tokenized venues are testing different trading and settlement infrastructure around the same underlying securities.
Canada Is Testing Tokenization From a Different Direction
Canada is already testing tokenized capital markets through a different mix of projects. The Canadian Securities Administrators say more than 240 organizations have participated in Project Tokenization, including issuers, fintechs, custodians, marketplaces and clearing agencies. The work is examining practical use cases, regulatory barriers and whether temporary exemptions may be needed for live testing.
Canada is also testing tokenized debt and settlement through Project Samara. RBC, TD Securities, the Bank of Canada and Export Development Canada tested a C$100 million tokenized EDC bond, secondary trading, coupon payments, redemption and settlement using wholesale central bank deposits. The U.S. is now testing tokenized secondary trading in listed equities, while Canada is testing bonds, settlement and other parts of market infrastructure.
See: Canada Tests Tokenization Across Capital Markets
For Canadian exchanges, dealers and fintechs, the SEC exemption provides a live example of how tokenized trading can be introduced without removing issuer rights or existing market controls. The five year test will generate evidence on liquidity, settlement, custody, investor demand and operating risk that Canadian regulators and market participants can compare with results from domestic projects.
The competitive risk for Canada is less about an immediate loss of stock trading volume and more about where tokenized market infrastructure develops first (not to mention retail attention, capital & talent and issuer & exchange competition). The U.S. now gives firms a five year window to build venues, liquidity, custody and investor products around real listed shares. If that attracts developers, capital and users, Canadian exchanges and fintechs could end up adopting models proven elsewhere rather than building them first at home.
Talking Point
If tokenized shares can keep the same shareholder rights while using different trading, custody and settlement infrastructure, which parts of today's capital markets stack will still earn their place in the future?
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