Simply put
- The World Federation of Exchanges is urging the SEC to restrict exemptions for cryptocurrency platforms.
- Concerns have been raised about tokenized equity products being sold without adequate protections.
- The SEC is contemplating a sandbox framework to provide temporary relief for cryptocurrency companies.
The Federation of Securities Exchanges recently sent a letter to the U.S. Securities and Exchange Commission, requesting the regulator to eliminate special exemptions given to crypto companies that market tokenized stocks.
In a letter addressed to the SEC’s Crypto Task Force, which was sent last week, the World Federation of Exchanges, including members like Nasdaq and CBOE, expressed that exemption relief shouldn’t facilitate crypto trading platforms to assume roles similar to national stock exchanges without adhering to full compliance.
The federation expressed being “alarmed” about various brokers and crypto platforms attempting to offer so-called tokenized U.S. stocks, as mentioned in a position paper published in late August.
The letter, signed by CEO Nandini Sukumar, warned that these products might be marketed as equity tokens or something similar, calling attention to possible investor risks.
It added, “While we support the principle of exemption, we are concerned that widespread use of such relief poses risks to investors and the health of the market.”
Exemption relief is a regulatory mechanism that may allow companies to bypass certain legal requirements, provided it is deemed in the public interest without compromising investor protection. This relief can be temporary or permanent.
The WFE acknowledged the SEC’s right to employ exemptive relief, but argued this should only occur when “the relief is reasonably necessary for the company to provide its products or services on a level playing field” and aligns with public interest and investor protection.
This position from the federation comes as the SEC considers a potential sandbox—a framework offering time-limited exemptions to crypto platforms marketing tokenized stocks—aimed at evaluating how digital asset markets may function under new regulatory conditions.
In October, SEC Chairman Paul Atkins mentioned that the agency was exploring a formal “innovation exemption” that could grant crypto companies temporary relief from existing regulations.
Under this framework, platforms would be allowed to pilot products like tokenized stocks, with oversight from the SEC, as regulators assess long-term policies.
Past attempts at introducing tokenized stock products in the U.S., such as those from Robinhood, faced scrutiny. The company has now shifted to offering blockchain-based equity through a European partner.
Inquiries have been made to both the SEC and the World Federation of Exchanges for comments on the matter.
