The SEC has approved a five-year framework for tokenized US stocks that prioritises shareholder rights over continuous trading or faster settlement.
Under the exemption, each token representing a National Market System stock must provide the same economic, voting, dividend and liquidation rights as the equivalent traditional share.
Products offering only exposure to a share price are excluded from the arrangement. Bitget Wallet COO Alvin Kan told crypto.news that legal ownership would matter more to investors than 24-hour access, settlement speed or the country where a token is issued.
An approved token must preserve an investor’s economic interest in the company, entitlement to dividends, voting rights and claims during liquidation. Listed companies can also object if an unrelated third party attempts to tokenize their shares, giving issuers some control over how their securities are represented on blockchain markets.
Token ownership and price exposure
Kan said investors should focus on the legal rights attached to a token rather than whether a product is marketed as a US or offshore offering.
Two tokens tracking the same company’s share price may provide very different protections. One could represent a direct or beneficial interest in shares held through a regulated arrangement, while another might be a contract with an intermediary that simply promises to follow the share price.
That distinction affects whether investors can receive dividends, vote on corporate matters or claim assets if the issuer is liquidated. It may also expose them to a platform, custodian or special-purpose entity on which their contractual rights depend.
An examination of tokenized ownership structures on Sep. 11 found that products can represent direct shares, custodial claims or synthetic contracts. Even where tokens can move freely between blockchain addresses, company rules, securities laws and underwriter restrictions may still limit transfers.
Kan said many crypto-native products outside the United States provide price exposure or a contractual claim against an intermediary. The SEC pathway instead requires an approved NMS stock token to retain the rights attached to the conventional security.
Coinbase CEO Brian Armstrong made a similar distinction on Sep. 14, saying the exchange’s stock tokens use real securities rather than synthetic assets or debt instruments. According to a report on its fully backed stock tokens, Coinbase holds the underlying shares through an offshore special-purpose company and a regulated US broker.
Verified holders can request redemption of the underlying shares. Dividend proceeds are generally reinvested after taxes and fees, although Coinbase’s products are unavailable to US persons and are not registered under the US Securities Act.
Potential benefits and limits
Kan said eligible users could benefit from self-custody, fractional ownership, continuous trading and almost immediate settlement. The SEC has also identified those features as possible advantages of placing securities on blockchain systems.
Around-the-clock trading could reduce restrictions created by normal exchange hours, while fractional units could make high-priced shares more accessible. Blockchain settlement could also shorten the interval between a completed trade and the final transfer of ownership.
However, Kan warned that using blockchain does not automatically create a better investment product.
“If access remains heavily permissioned, liquidity is shallow and users still face multiple intermediaries, blockchain may mainly modernize the back end without materially changing the front-end experience,” he said.
The practical question for investors is whether the structure reduces the work involved in settlement, record reconciliation and distribution. Simply transferring a stock record to a blockchain could change the market’s underlying technology without materially improving the customer experience.
Ownership records remain part of the debate. On Sep. 1, the SEC proposed changes to federal transfer-agent rules and forms, which the agency said had not been substantially revised since the late 1970s and early 1980s.
Under the proposal, transfer agents could use distributed-ledger technology as an official record. It would not, however, automatically make every stock-linked token a legal share or give its holder shareholder rights.
Five-year exemption offers room for testing
Kan described the SEC order as operational clarity rather than permanent legal certainty for banks, brokerages, trading venues and blockchain providers.
The order expires five years after publication, includes limits on trading symbols and volume, and can be modified by the SEC. It is intended to provide information for future rulemaking.
Those conditions give institutions scope to develop pilot programmes, connect existing systems and test modular infrastructure. But firms making longer-term investments will distinguish between a temporary exemptive order and obligations established in final agency rules or federal law.
The SEC is using its existing authority over securities already covered by the Exchange Act, meaning it does not need Congress to resolve every question surrounding crypto-asset classification before testing blockchain applications for instruments already treated as securities.
Kan said this separates legislative reform from agency-led changes to market structure. Congress can legislate on digital assets across multiple markets, while the SEC can act within its current securities mandate.
The exemption was issued two days after the Senate failed to advance the Digital Asset Market Clarity Act, or CLARITY Act, in a Sep. 15 procedural vote.
The bill would have created a federal market structure for digital assets and divided regulatory responsibilities between the SEC and the Commodity Futures Trading Commission. Its failure did not remove the SEC’s authority over products already classified as securities.
The 50-49 vote left the bill 10 votes short of the 60 needed to invoke cloture and begin formal debate. Passing the motion would not have enacted the legislation; it would only have allowed consideration of the House-approved measure and possible amendments.
All participating Democrats opposed cloture. Republican Sens. Susan Collins, Josh Hawley, Jerry Moran and Thom Tillis also voted against it. Tillis changed his vote for procedural reasons, preserving the option of requesting reconsideration.
