SEC Signals Openness to Regulatory Sandbox for Tokenized Securities Trading
The U.S. Securities and Exchange Commission (SEC) has indicated a potential willingness to introduce a regulatory sandbox for digital asset exchanges—a move that could allow trading platforms to experiment with tokenized securities under limited regulatory exemptions.
A New Chapter for Blockchain-Based Securities?
Tokenized securities are traditional financial instruments like stocks or bonds issued and traded on blockchain networks. The idea is to leverage blockchain’s efficiency, transparency, and programmability while preserving the characteristics of traditional securities.
On April 11, during the second SEC Digital Assets Roundtable—this time focused on digital asset trading—Republican commissioners floated the idea of allowing exchanges like Coinbase to list and trade such tokenized securities alongside other crypto products.
Acting Commissioner Mark Uyeda delivered a pre-recorded statement encouraging market participants to submit input on areas where targeted regulatory relief might be appropriate:
“A time-limited, conditional exemption framework could allow unregistered exchanges to engage in innovation while broader regulatory structures are still being developed,” Uyeda said.
Conditional Flexibility for Innovation
Hester Peirce, one of the SEC’s most crypto-friendly voices and head of the agency’s new Digital Assets Task Force, also supported the idea during the live event in Washington, D.C. She emphasized the value of experimentation:
“Participants would be able to test what works commercially and technologically. These insights could prove valuable for our future rulemaking efforts.”
Peirce previously proposed a “Digital Securities Sandbox” in 2023, inspired by the UK’s model, allowing firms to experiment with the issuance, trading, and clearing of tokenized securities. However, under then-Chair Gary Gensler, the initiative failed to gain traction.
A Global Trend—and U.S. Caution
Countries like Colombia have already piloted digital asset-specific sandboxes. Even in the U.S., sandboxes have been used in traditional finance—most notably in loan underwriting—to promote innovation under monitored conditions.
However, allowing unregistered crypto exchanges to handle tokenized stocks and bonds poses regulatory risks, according to Commissioner Caroline Crenshaw, the SEC’s lone Democrat. Speaking at the roundtable, she warned:
“Digital asset exchanges often offer multiple services under one roof—this lack of separation significantly increases systemic risk.”
Crenshaw added that such risks could jeopardize not only the orderly functioning of digital asset markets but also pose threats to the banking and traditional financial systems.
This development suggests a growing divide within the SEC over how to regulate digital assets. Yet, it also signals that the agency may be entering a more nuanced, innovation-friendly phase, especially amid increasing calls for the U.S. to catch up with global crypto policy standards.
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