On May 8, 2025, the Securities and Exchange Commission (“SEC”) held the 31st International Institute for Securities Market Growth and Development. Commissioner Peirce used this opportunity to discuss an approach to regulating the tokenization of traditional securities—in other words, issuing traditional securities through a blockchain or distributed ledger.
The Commissioner noted that other jurisdictions have implemented “regulatory sandboxes” as a way to inform regulators about tokenized securities and the regulatory structure that may be necessary to protect investors. These sandboxes allow firms to issue tokenized securities without complying with certain regulations that otherwise would apply and which were not designed to regulate these assets. The SEC’s Crypto Task Force is considering and has requested comment on conditional exemptions from SEC registration requirements to allow the use of trading systems for eligible tokenized securities. In support of a sandbox approach, Commissioner Peirce observed that firms seeking to operate an automated market making system may not be willing to devote resources or may otherwise be unable to comply with the SEC’s Regulation NMS or to register as a broker-dealer, a clearing agency or an exchange.
Commissioner Peirce stated that she supports exemptions conditioned on compliance with rules designed to prevent fraud and manipulation, which may include rules requiring recordkeeping, reporting, monitoring, SEC exams and disclosure about the underlying assets and relevant risks, in addition to rules limiting the number of tokenized securities that may be listed and their trading volumes. Commissioner Peirce closed her remarks by noting that such platforms could provide cutting-edge technologies to trade, clear and settle securities, and sandboxes could inform regulators regarding striking the appropriate regulatory balance.
Commissioner Peirce’s full remark can be found: here.
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