Key Facts

• The SEC is considering using its power to grant exemptions from securities laws to tokenization "innovation" efforts, rather than establishing a full-fledged rule to clear the path for tokenization.
• Former SEC lawyers believe that this approach, which involves granting exemptions, is not as strong or reliable as a comprehensive rule would be in providing clarity and security for tokenization efforts.
• The exemptions would be granted based on the SEC's authority to make exceptions for certain types of securities or offerings that meet specific criteria, but the exact criteria and scope of these exemptions are not specified.
• A full-fledged rule, in contrast, would provide a more definitive and lasting framework for tokenization, offering greater certainty and stability for market participants.
• The consideration of exemptions rather than a rule reflects a tension between facilitating innovation in the financial sector and ensuring that new developments comply with existing securities laws and regulations.