SEC's Peirce Unveils Tailored "Innovation Exemption" for Onchain Trading of U.S. Stocks

According to ChainCatcher, SEC Commissioner Hester M. Peirce released a statement on the agency's approval of an "Innovation Exemption," a temporary, conditional framework designed to allow so-called Tokenized Securities Venues (TSVs) to facilitate onchain trading of NMS (National Market System) equities. Under the order, TSVs would operate automated market maker liquidity pools and establish participant access standards. In return, TSVs are carved out from the Exchange Act definition of an "exchange," while specified liquidity providers to TSVs receive relief from being treated as "dealers." Issuers can opt out if they do not want their shares traded on TSVs. The exemption is available to U.S. persons, and participation is open to both established institutions and new market entrants. Peirce said the Commission is not presuming that firms relying on the exemption are necessarily "exchanges" or "dealers"; instead, the SEC aims to observe who uses the relief and how before making broader regulatory determinations. Peirce also drew a firm line around what the order covers. She said the initiative is not aimed at decentralized finance. In her view, truly decentralized systems run by automated software do not present the core securities-regulatory concern that intermediaries trusted by investors might be foolish, careless, or compromised. Investors transacting peer-to-peer through permissionless smart contracts, she added, generally would not need an exemption. TSVs are presented as only one approach to onchain securities trading. Peirce noted the SEC remains open to alternative models, and said any onchain trading structure that meets existing Exchange Act requirements may not require exemptive relief at all.