SEC delays plan to roll out tokenized stocks: Here’s why Wall Street is worried

The US Securities and Exchange Commission (SEC) has postponed plans to roll out exemptions allowing crypto firms to trade tokenized assets tied to stocks, originally expected this week. The delay follows stakeholder feedback, including concerns over third-party tokens issued without public company approval, as well as regulatory and operational uncertainties. Under the proposed “innovation exemption,” platforms trading tokenized shares would need to ensure investors receive the same rights as traditional shareholders, including dividends and voting privileges. However, critics argue blockchain anonymity complicates these requirements, as companies may struggle to verify token holders or enforce shareholder rights. SEC Commissioner Hester Peirce suggested the exemption will be narrowly focused, permitting only digital representations of existing equity securities. Yet experts, including former regulators, warn tokenized shares could confuse corporate processes like dividend payments and shareholder voting. A Wall Street executive noted public companies may face operational challenges if tokenized shares gain traction on blockchains. Another major concern is regulatory evasion. Crypto expert Austin Campbell, now a professor at NYU Stern, cautioned that tokenized securities could end up on platforms lacking strict know-your-customer (KYC) policies. This risks allowing sanctioned entities, such as North Korean actors, to hold tokens without oversight. Campbell highlighted the difficulty of tracking anonymous token ownership, which could undermine US financial regulations. Sources close to the SEC indicate internal divisions, with some officials skeptical of allowing third-party token trading. The agency continues reviewing stakeholder input before finalizing the proposal, though no changes to the draft have been confirmed. The delay underscores broader tensions between innovation in digital assets and traditional financial safeguards, leaving Wall Street stakeholders uncertain about the future of tokenized securities.