Key Takeaways
- Major stock exchanges warn SEC against granting regulatory exemptions to crypto firms
- “Innovation exemption” could allow unregistered companies to sell tokenized stocks
- WFE says this creates market integrity risks and undermines investor protection
The Securities and Exchange Commission’s plan to grant crypto companies regulatory relief for selling tokenized stocks could harm investors, according to a warning from major stock exchanges. The World Federation of Exchanges (WFE) argues that such exemptions would create market integrity risks and undermine decades of investor protection.
Regulatory Battle Over Tokenized Stocks
Several crypto companies plan to sell crypto tokens linked to listed equities to retail investors seeking stock exposure without direct ownership. However, to operate in the U.S., unregistered crypto firms would need SEC approval through no-action letters or exemptions.
SEC Chair Paul Atkins confirmed the agency is developing an “innovation exemption” from securities laws to enable crypto companies to experiment with new business models.
Exchanges Voice Strong Opposition
In a November 21 letter, the WFE – whose members include Nasdaq and Deutsche Boerse – strongly opposed the exemption plan. “The SEC should avoid granting exemptions to firms attempting to bypass regulatory principles that have safeguarded markets for decades,” WFE CEO Nandini Sukumar told Reuters.
The SEC published the WFE’s letter but declined to comment on the matter.
Level Playing Field Concerns
The letter signals mainstream finance pushing back against crypto industry demands, particularly as crypto firms begin competing directly with traditional exchanges.
“We and the crypto platforms should be competing on a level playing field, we should be subject to the same rules,” said James Auliffe, who leads the WFE’s technology working group.
Efficiency Claims vs Market Reality
While tokenized stock issuers claim blockchain integration could make trading more efficient, traditional exchanges remain skeptical. Auliffe noted that exchanges are still evaluating whether blockchain benefits outweigh costs for stock trading.
“What you can see from the fact that no one’s done it, is that equity markets in particular are very very efficient already,” he said.
