The US Securities and Exchange Commission (SEC) is currently considering a potential exemption order that would allow firms to issue and trade securities using distributed ledger technology (DLT). This exciting development was revealed by SEC Commissioner Hester Peirce during a recent address at the agency’s International Institute for Securities Market Growth and Development.
Peirce explained that the SEC’s Crypto Task Force is exploring a conditional order that would alleviate regulatory burdens for platforms focusing on tokenized securities. This measure would enable qualified firms to utilize DLT for trading, clearing, and settling securities without having to register under traditional SEC frameworks.
One of the main reasons behind this proposed exemption is to address the current obstacles that companies face when it comes to automated market-making models. Many of these firms are required to register as broker-dealers, clearing agencies, or exchanges, which can be a time-consuming and expensive process. This, in turn, has deterred many firms from entering the tokenized securities space.
Peirce believes that a tailored exemption could help lower these barriers and allow the SEC to develop updated rules that are more aligned with blockchain technologies. She emphasized that any firm granted relief under this exemption must adhere to strict guidelines to ensure transparency, financial responsibility, and investor protection.
In addition to transparency and investor protection, the proposed exemption would also include safeguards to prevent fraud and market manipulation. This would involve mandatory customer disclosures and robust monitoring protocols to ensure the integrity of the trading platforms.
Peirce acknowledged that this proposal is a work-in-progress and invited feedback from market participants and other interested parties. The ultimate goal is to create a commercially feasible approach that not only protects investors but also allows them to benefit from cutting-edge technologies in trading, clearing, and settling securities.
Overall, the SEC’s consideration of this exemption order represents a significant step towards embracing blockchain technology in the securities market. By creating a more conducive regulatory environment for DLT-based platforms, the SEC is paving the way for innovation and growth in the digital securities space.