Key insights
- Robinhood (HOOD) stock rose 6% after the SEC issued guidance allowing tokenized securities to trade in the U.S. via an "Innovation Exemption." This five-year plan exempts certain trading venues and liquidity providers, facilitating onchain trading of tokenized stocks. While seen as a step towards digital markets, industry participants worry future administrations could reverse the guidance without legislation.
Investing.com -- Robinhood Markets (NASDAQ: HOOD) shares rose 6% Thursday following the Securities and Exchange Commission’s announcement of guidance permitting digital versions of securities to trade in the United States.
The SEC moved forward with its plan after the Clarity Act failed to advance in a Senate vote on Tuesday. The regulator issued what it calls the "Innovation Exemption," a five-year plan allowing tokenized stocks to begin trading through designated venues.
The guidance grants two forms of temporary, conditional exemptive relief under the Securities Exchange Act of 1934. First, it exempts certain trading venues called Tokenized Securities Venues from the definition of "exchange." Second, it exempts certain liquidity providers from the definition of "dealer."
SEC Chairman Paul S. Atkins stated the exemption represents "a significant step forward, within its statutory authority, to bring America’s capital markets into the digital age by facilitating onchain trading of certain tokenized stocks."
The Innovation Exemption includes several conditions for investor protection. TSVs must be U.S. entities complying with sanctions programs administered by the Office of Foreign Assets Control. The venues must set standards allowing only certain participants to trade tokenized stocks. Tokenized securities must provide holders with the same rights as traditional securities, including dividend and voting rights. Issuers retain the right to object and prevent their securities from trading on a TSV.
The exemption follows the SEC’s launch of "Project Crypto" over a year ago, aimed at modernizing regulations to enable financial markets to move onchain. While the exemption provides opportunities for crypto firms seeking access to U.S. markets, industry participants have expressed concerns that a future administration could reverse the guidance without legislation.
The SEC indicated the temporary exemption would allow tokenized stock trading while the Commission considers additional regulatory action.