The U.S. Securities and Exchange Commission could soon give tokenized stocks a major boost.
The regulator is expected to unveil an “innovation exemption” for tokenized stocks as early as Friday, according to Bloomberg. If introduced, the framework could make it easier for companies and trading platforms to experiment with blockchain-based versions of traditional stocks, potentially opening the door to equity markets that operate 24 hours a day, seven days a week.
The idea behind tokenized stocks is fairly simple. A traditional stock can be represented digitally on a blockchain, allowing transactions and ownership records to be handled using blockchain infrastructure.
Blockchain could take stocks beyond market hours
Traditional stock markets operate during specific hours, with some brokers offering limited premarket and after-hours trading. Blockchain networks, however, do not have to follow those same schedules. A tokenized stock market could theoretically remain open around the clock, allowing investors to trade whenever they want.
For someone in Asia, Europe or another time zone, that could mean no longer having to wait for U.S. markets to open before buying or selling certain assets.
But getting there is not as simple as putting stocks on a blockchain.
The SEC still has to consider how tokenized securities fit into existing rules covering investor protection, custody, clearing, settlement and market structure. Regulators also need to determine how tokenized shares relate to the actual underlying stocks.
For example, would someone holding a tokenized version of a stock have the same voting rights as a traditional shareholder? Would they receive dividends in the same way? And who would legally be recognized as the owner of the underlying shares?
The questions become even more important if tokenized stocks start trading on multiple platforms.
There is also the issue of unauthorized tokenized shares. Companies could potentially create digital representations of stocks without the involvement of the underlying issuer, raising questions about whether investors are actually buying the stock itself or simply a digital product that tracks its price.
The proposed exemption could help address some of these challenges by giving companies a clearer regulatory path to test blockchain-based markets without waiting for an entirely new set of securities laws.
It would also fit into a broader push by Wall Street and crypto companies to bring traditional assets onto blockchains.
Wall Street bets on 24/7 tokenized markets
Financial institutions have increasingly explored tokenized stocks, bonds, funds and other assets as blockchain technology becomes more widely accepted. The goal is not necessarily to replace traditional markets overnight, but to make trading and settlement faster, more flexible and potentially available around the clock.
Still, the SEC’s move would not mean investors could suddenly trade every U.S. stock 24/7. Individual platforms and issuers would still need to comply with applicable rules, and the technology and market infrastructure would have to catch up.
Even so, an innovation exemption could be an important step.
For years, tokenized equities have been talked about as a bridge between traditional finance and crypto. If the SEC gives the industry more room to experiment, that bridge could finally start becoming a real financial market.
And if the experiments work, the idea of waiting for the stock market to open every morning could eventually start to feel surprisingly old-fashioned.
