Nov 26 (Reuters) – The Securities and Exchange Commission’s possible plan to grant crypto companies an exemption from regulation allowing them to sell “tokenized” stocks risks harming investors, a group of exchanges said in a letter to the U.S. regulator this week.
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SEC Chairman Paul Atkins said the agency was working on developing an “innovation exemption” from the securities laws that would allow crypto players to experiment with new business models.
“The SEC should avoid granting exemptions to companies that attempt to circumvent regulatory principles that have protected markets for decades,” WFE CEO Nandini Sukumar told Reuters.
The SEC, which posted the WFE letter on its website, declined to comment.
THE SEC’S NEW APPROACH TO CRYPTO
Stock tokenization typically involves the creation of cryptographic tokens tied to a pre-existing security.
The entire financial industry, including banks, is exploring ways to introduce crypto-related products and services into their businesses.
The WFE letter claimed to be “pro-innovation” and called tokenization a “natural evolution of capital markets.”
Nonetheless, his letter is a sign that the traditional financial industry is starting to push back against some of the crypto world’s wishes, especially as parts of the crypto industry begin to compete directly with their own companies.
“We and the crypto platforms should compete on equal terms, we should be subject to the same rules,” said James Auliffe, who leads the WFE technology working group.
Issuers of tokenized stocks say integrating blockchain – the technology behind cryptography – into stock markets could make trading more efficient.
Auliffe said exchanges are always looking for scenarios where the benefits of moving stock trading to blockchain outweigh the costs. “What you can see from the fact that no one has done this is that the equity markets in particular are already very, very efficient,” he said.
Reporting by Elizabeth Howcroft in Paris and Hannah Lang in New York; Editing by Tommy Reggiori Wilkes and Emelia Sithole-Matarise
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