SEC Exemption for Tokenization Seen as Less Robust Than Full Rule
Former SEC lawyers say the agency's use of exemptive authority for tokenization lacks the durability of a formal rule.
The U.S. Securities and Exchange Commission (SEC) is reportedly preparing to use its exemptive authority to allow certain tokenization projects to operate without full securities registration. However, former SEC attorneys caution that this approach may not provide the same legal certainty as a formal rulemaking.
According to sources familiar with the matter, the SEC plans to issue exemptive orders enabling blockchain-based tokenization initiatives to bypass strict securities laws. The move is intended to foster innovation in digital asset markets while maintaining investor protections.
Exemptive Orders vs. Formal Rulemaking
Former SEC lawyers note that exemptive orders are less resilient than full-fledged rules because they can be revoked more easily and do not carry the same industry-wide applicability. A formal rule would undergo a public notice-and-comment period, providing greater stability and clarity for market participants.
- Exemptive orders are issued on a case-by-case basis and can be rescinded without the same procedural hurdles.
- Formal rules require a longer process but offer broader legal certainty and are harder to overturn.
- The SEC has previously used exemptive orders for specific fintech initiatives, but with mixed results.
The SEC has not publicly confirmed the details of its planned tokenization exemption. The agency continues to balance regulatory enforcement with efforts to encourage innovation in the cryptocurrency space.