The long-awaited U.S. Securities and Exchange Commission rule to begin allowing tokenization of securities — a change that could have profound effects on the financial markets — has been facing the contentious perception it’ll allow synthetic tokens, but a commissioner has taken the unusual step to post statements about the unpublished rule to potentially counter those views.
SEC Commissioner Hester Peirce, who had pushed for safe harbors for tokenization well before the arrival of the new chairman under President Donald Trump, issued a pair of statements on social media site X on Thursday and Friday to clarify what she expects from the rule that’s set to emerge soon. Her posts suggested that the proposed rule won’t pave the way for synthetic tokenized securities — third-party tokenization that references a security but doesn’t carry the equity, voting and other rights associated with the security.
Peirce, the commissioner behind the SEC’s Crypto Task Force, wrote that she expects the coming rule would be “limited in scope & would facilitate trading only of digital representations of the same underlying equity security that an investor could purchase in the secondary market today, not synthetics.”
Peirce posted again to explain what she meant by synthetics, directing people to read the SEC’s January statement on tokenized securities, “which distinguishes tokenized versions of issuer-sponsored stocks and of stocks that SEC-registered firms hold for their customers from synthetic instruments that provide exposure to stocks.”
The flames had been fanned by Bloomberg News reporting this week that predicted the agency was leaning toward including a path for synthetic tokens tradeable on decentralized crypto platforms. Peirce said she appreciates the public’s keen interest in the rule “but not the hyperbole” about it.
Peirce did not return a request for comment about her posts.
The consequential rule will represent the most meaningful step the SEC has taken to-date to forge a new regulatory approach to crypto trading in the U.S. Chairman Paul Atkins has been saying for months that his agency is poised to release the wide-ranging proposals to provide regulatory exemption in the crypto space.
He outlined some of the effort in a March speech at the DC Blockchain Summit, saying the agency was contemplating safe harbors from certain regulatory demands for various crypto activities, including giving startups something like four years of registration exemption “provide developers with a regulatory runway during which they could work to reach maturity”; a “fundraising exemption” for certain crypto assets in which “entrepreneurs could raise up to a defined amount (say $75 million) during any 12-month period”; and an “investment contract safe harbor” to keep certain crypto assets from being defined as a regulated security, with the safe harbor triggering when the issuer finishes all their managerial efforts.
Atkins said at the time that Commissioner Peirce’s “fingerprints are all over” the SEC’s rulemaking.
While the SEC — alongside its sister agency, the Commodity Futures Trading Commission — has been writing crypto rules, Atkins and CFTC Chairman Mike Selig have said they’re doing so with the understanding that Congress is right behind them with the Digital Asset Market Clarity Act to put some of the same ideas into permanent law.
“Only Congress can ensure that regulation in this area is future-proofed through comprehensive market structure legislation,” Atkins said in March.