Global Exchanges Urge SEC to Curb Broad Crypto Exemptions, Warn on Tokenized Stock Risks

Core Viewpoint - A federation of stock exchanges has urged the U.S. Securities and Exchange Commission (SEC) to eliminate special exemptions for crypto firms offering tokenized stocks, expressing concerns over investor protection and market integrity [1][2][4]. Group 1: Concerns Raised by the Federation - The World Federation of Exchanges (WFE) expressed alarm over the increasing number of brokers and crypto-trading platforms offering tokenized U.S. stocks, stating these products are misrepresented as equivalent to actual stocks [3]. - The federation highlighted that while it supports the principle of exemptive relief, its broad application could pose risks to investors and market integrity [4]. - The WFE emphasized that exemptive relief should only be granted when necessary for firms to provide services on a level playing field and in alignment with public interest and investor protection [5]. Group 2: Regulatory Context and Developments - The SEC is considering a sandbox framework that may provide time-limited exemptive relief to crypto platforms offering tokenized stocks, as part of a broader initiative to explore modified regulatory conditions for digital asset markets [5][6]. - SEC Chair Paul Atkins mentioned that the agency is exploring formal "innovation exemptions" that could allow crypto firms temporary relief from existing regulations, with a framework expected to be introduced within the year [6]. - Previous attempts to launch tokenized stock products in the U.S. have faced scrutiny, including Robinhood's controversial offering of blockchain-based equities through a European partner [7].