SEC Advisory Committee Backs Tokenized Securities Plans to Modernize Wall Street Settlement

A key advisory group to the U.S. Securities and Exchange Commission has recommended that regulators advance a policy framework for tokenized securities, a move that could reshape how stocks are traded and settled by bringing blockchain technology into traditional markets.

During a vote held Thursday, the commission’s Investor Advisory Committee supported a proposal encouraging the agency to permit narrowly defined exemptions that would allow the trading of blockchain-based versions of equities. The recommendation suggests that tokenized securities trading should move forward only if strict conditions are met, including mandatory disclosures, ongoing third-party oversight, and rules designed to ensure investors receive the best available price for their trades.

The initiative aims to test how blockchain infrastructure could streamline the settlement process that has long depended on intermediaries such as brokers, transfer agents, and centralized clearing systems.

According to Paul Atkins, tokenized assets still fall squarely under existing securities laws, meaning they must adhere to the same investor protections that govern traditional equities. However, he noted that regulators are actively working toward clearer guidelines for how tokenization could operate within the current regulatory structure.

The committee’s recommendation provides added momentum to that effort, signaling growing institutional support for integrating blockchain technology into regulated financial markets. The advisory panel itself includes representatives from major trading firms, institutional investors, and academic experts.

One of the main benefits highlighted by the group is the potential for faster settlement. Traditional stock transactions often take at least a full day to finalize because multiple intermediaries must confirm and record the transfer of ownership. With tokenized securities, the transfer of the asset and the corresponding payment could occur simultaneously on a blockchain, embedding the ownership record directly on-chain.

Despite the efficiency gains, the committee cautioned that tokenization introduces new uncertainties. In its report, the panel warned that poorly designed exemptions or rapid adoption could expose investors to unfamiliar risks or higher operational costs that might outweigh the benefits of blockchain-based trading.

Even so, Atkins praised the committee for recognizing the potential advantages of tokenization, particularly its ability to reduce settlement risks and simplify the trading process by eliminating unnecessary middlemen.

He added that the commission may soon consider a limited “innovation exemption” that would allow controlled experimentation with tokenized securities while regulators develop a broader long-term framework for the technology.