Traditional financial markets are rapidly transitioning to onchain as the chair of the US Securities and Exchange Commission emphasized the concept of an “innovation exemption” to foster tokenization.
“U.S. financial markets are set to move on-chain,” stated Paul Atkins, chair of the SEC, in a Friday 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 introduce a new service for securities market tokenization.
The DTCC intends to tokenize various assets, including the Russell 1000 index, exchange-traded funds linked to major indexes, and US Treasury bills and bonds, which Atkins described as an “important step towards onchain capital markets.”
“On-chain markets will enhance predictability, transparency, and efficiency for investors,” he affirmed.
However, the approval for the DTCC’s pilot is merely the beginning, as the SEC is set to examine an innovation exemption to support builders in “transitioning our markets onchain,” free from “burdensome regulatory requirements,” Atkins added.
Atkins committed to promoting innovation as the sector advances toward onchain settlement, which involves processing transactions on a blockchain ledger, eliminating intermediaries, enabling continuous trading, and accelerating transaction finality.
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Cointelegraph has reached out to the SEC for insights on the specifics and timeline of an innovation exemption for tokenization.
Atkins initially proposed an innovation exemption for tokenization during his address at the Crypto Task Force Roundtable on DeFi on June 9.
The SEC’s no-action letter indicates that the agency will refrain from enforcement action as long as the DTCC’s product functions as detailed. The DTCC plays a crucial role in providing clearing, settlement, and trading services in the US securities infrastructure.
Asset tokenization entails the creation of tangible assets on the blockchain ledger, granting broader investor access via fractional shares and continuous trading opportunities.
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DTCC pilot and RWA builders drive more TradFi onchain
Crypto analysts have applauded the SEC’s decision to permit the DTCC’s new market tokenization service, which will confer the same rights and protections associated with traditional assets to tokenized ones.
“I’m not sure people fully comprehend how swiftly financial markets are progressing towards complete tokenization… It’s moving even faster than anticipated,” noted ETF analyst Nate Geraci in a Friday X post.
In recent months, the SEC has issued two no-action letters: one for a Solana-based decentralized physical infrastructure network (DePIN) initiative, and another in September that allowed investment advisers to utilize state trust companies as crypto custodians.
Concurrently, crypto projects are actively raising capital to develop the necessary infrastructure for tokenized onchain markets.
On Tuesday, the asset tokenization network Real Finance completed a $29 million private funding round aimed at creating an infrastructure layer for real-world assets (RWAs), potentially enhancing institutional engagement.
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