Bitcoin (BTC) and much of the broader crypto market fell sharply Friday evening after the US Securities and Exchange Commission (SEC) delayed a plan that would have provided broad exemptions for US crypto firms to trade tokenized assets tied to stocks.
At the time of writing, Bitcoin was down to roughly $75,834, wiping out about $33.8 billion from its market capitalization. Ethereum (ETH) also slipped to around $2,000, with market cap losses of approximately $8.58 billion.
Crypto Innovation Exemption Delayed
According to Bloomberg, the SEC staff was preparing to release what it calls an “innovation exemption” for tokenized stocks as soon as this week, citing people familiar with the commission’s plans.
Those sources said a draft framework had already been prepared and reviewed by staff, but the SEC’s timeline has been pushed back as the agency weighs input from stock-exchange officials who have held discussions with SEC staff over the previous few days.
A key sticking point involves the proposal’s openness to trading so-called “third-party tokens.” These are tokens that could be issued without the backing or explicit consent of the public companies associated with the underlying shares.
The SEC, the reporting notes, has not made any decision to alter its draft proposal, but the lack of finalization appears to be part of the reason the broader crypto market reaction came when the delay became known.
Compliance Risks Mount
Under the SEC’s proposal, crypto platforms that offer these tokenized products would have to ensure that token buyers receive the same rights as traditional shareholders. That includes entitlements such as dividends and voting rights.
However, former regulators and market experts highlighted that it remains unclear how issuers and platforms would technically meet these requirements in practice when tokens transfer across pseudonymous blockchain networks rather than through conventional shareholder record systems.
The reporting also suggests not all SEC officials agree with expanding the scope to allow third-party tokens. Among those weighing in publicly is pro-crypto Commissioner Hester Peirce.
Peirce posted on X that she expects the innovation exemption to be “limited in scope.” She said it should “facilitate trading only of digital representations of the same underlying equity security that an investor could purchase in the secondary market today.”
There are also compliance and security worries. One cited concern is that token structures could be exploited by bad actors operating overseas, using loopholes in blockchain and crypto-related processes to avoid regulatory oversight within the US.
Featured image created with OpenArt, chart from TradingView.com
