SEC moves forward on rules for tokenized securities trading, prioritizes "innovation without arbitrage"

The US Securities and Exchange Commission (SEC) is developing a regulatory framework for the listing and trading of tokenized securities. The agency seeks to integrate blockchain-based assets into traditional financial markets without creating regulatory advantages for any market participant.

Speaking at the Piper Sandler Global Exchange & Fintech Conference in New York on Thursday, SEC Division of Trading and Markets Director Jamie Selway said the initiative is being pursued under the principle of "innovation without arbitrage," a priority established by SEC Chair Paul Atkins.

"Chairman Atkins has directed the Division to work on developing a framework to list and trade tokenized securities, with 'innovation without arbitrage' as our guiding principle," Selway said.

SEC to develop rules for tokenized securities amid increased institutional interest

The framework is intended to support technological innovation while ensuring tokenized securities compete on equal footing with traditional financial products. Selway stated that market outcomes should be determined by competition and investor demand rather than regulatory differences between digital and conventional asset structures.

The effort builds on previous SEC guidance addressing digital asset custody, wallets and tokenized securities operations. The agency is now examining how existing regulations can be adapted to support tokenized securities throughout their lifecycle, including issuance, trading, clearing, settlement and custody.

Quoting remarks from Atkins in March, Selway said firms should not be forced to navigate overlapping regulatory frameworks when products incorporate features that fall under multiple agencies' jurisdiction. He added that greater coordination between regulators could lower barriers to innovation while providing clearer rules for market participants.

Selway also highlighted ongoing coordination between the SEC and the Commodity Futures Trading Commission (CFTC) to reduce compliance burdens and regulatory uncertainty for firms operating across both markets.

He encouraged market participants to provide feedback on areas where regulatory alignment may be needed, including data reporting requirements, portfolio margining and product classifications.

The SEC's latest efforts come as interest in tokenized assets continues to grow among traditional financial institutions.

Despite the potential benefits, Selway cautioned against excessive leverage and speculative activity in digital asset markets, emphasizing the need to maintain investor protections as new technologies are integrated into regulated markets.

The SEC is expected to continue discussions with exchanges, fintech firms and other industry stakeholders as it develops the framework, with additional guidance and proposals likely in the coming months.