Traditional financial markets are swiftly transitioning onchain as the chair of the US Securities and Exchange Commission emphasizes the concept of an “innovation exemption” to advance tokenization.
“U.S. financial markets are set to shift on-chain,” stated Paul Atkins, the SEC chair, in a recent X post, noting that the agency is “adopting new technologies to facilitate this onchain future.”
His remarks followed the SEC’s issuance of a “no action” letter to a subsidiary of the Depository Trust and Clearing Corporation (DTCC), allowing it to launch a new securities market tokenization service.
The DTCC aims to tokenize various assets, including the Russell 1000 index, ETFs that track major indexes, and US Treasury bills and bonds, which Atkins described as an “essential step towards onchain capital markets.”
“On-chain markets will offer enhanced predictability, transparency, and efficiency for investors,” he asserted.
However, the approval for the DTCC’s pilot is just the beginning, as the SEC will evaluate an innovation exemption to allow developers to begin “transitioning our markets onchain,” unencumbered by “burdensome regulatory requirements,” Atkins added.
Atkins committed to fostering innovation as the sector progresses towards onchain settlement, which would execute transactions on a blockchain ledger, eliminating intermediaries, and enabling round-the-clock trading and quicker transaction finality.
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Cointelegraph has reached out to the SEC for further details and timeline regarding an innovation exemption for tokenization.
Atkins first introduced the idea of an innovation exemption for tokenization during his comments at the Crypto Task Force Roundtable on DeFi held on June 9.
The SEC’s no-action letter signifies that the agency will not take enforcement action if the DTCC’s product functions as outlined. The DTCC plays a critical role as an infrastructure provider for U.S. securities by offering clearing, settlement, and trading services.
Asset tokenization entails minting tangible assets on a blockchain ledger, enhancing investor access through fractionalized shares and opportunities for 24/7 trading.
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DTCC pilot and RWA developers drive more TradFi onchain
Crypto analysts have lauded the SEC’s decision to permit the DTCC’s new market tokenization service, which will provide tokenized assets with the same rights and investor protection mechanisms as traditional assets.
“I’m not sure people fully grasp how swiftly financial markets are moving toward complete tokenization… It’s progressing even faster than I anticipated,” remarked ETF analyst Nate Geraci in a recent X post.
In recent months, the SEC has issued two no-action letters: one for a Solana-based decentralized physical infrastructure network (DePIN) project, and another in September permitting investment advisers to utilize state trust companies as crypto custodians.
Meanwhile, crypto initiatives continue to secure funding to establish the infrastructure required for tokenized onchain markets.
On Tuesday, asset tokenization network Real Finance completed a $29 million private funding round to create an infrastructure layer for real-world assets (RWAs) that can enhance institutional involvement.
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