SEC's Exemption for Tokenized Stocks Will Expire in Five Years

A broad rebound in crypto markets this week followed the SEC's new framework for tokenized equities. However, the rally is built on an exemptive order rather than permanent law, leaving it open to reversal by a future commission chair with a single directive.

Two days after the Senate blocked the Clarity Act — legislation designed to establish federal oversight of digital assets — the SEC issued the exemption. Eligible platforms can now trade tokenized U.S. stocks for up to five years without registering as exchanges.

The Details Behind the Tokenization Exemption

SEC Chair Paul Atkins characterized the order as a temporary measure while Congress remains at a standstill. Bloomberg Intelligence senior government analyst Nathan Dean informed Bloomberg that the rule was released as guidance, not through formal rulemaking.

The difference carries weight. Reversing formal rules requires an extended public process; guidance does not.

“This wasn’t rulemaking. It was guidance so a future SEC can essentially wipe it away with a stroke of a pen that allowed for the tokenization of securities.”

Nathan Dean, Bloomberg Intelligence, Bloomberg

The Five-Year Countdown Begins

Jamie Cellway, who directs the SEC's Division of Trading and Markets, argues the exemption will become harder to withdraw over time. He told Bloomberg that once trading picks up, the exemption would be “really hard to remove.”

Nonetheless, the order contains a clear five-year sunset. That firm deadline creates uncertainty for banks, exchanges, and issuers who are being urged to construct infrastructure around it.

Separately, community banking groups have flagged deposit and lending risks linked to the broader tokenization movement. That gives another set of stakeholders reason to see the rule eliminated.

Whether this serves as a bridge to permanent legislation or a timer for a reversal rests with Congress. Dante Desparte, chief strategy officer at Circle, told Bloomberg that new rules could still arrive by year's end or sometime in 2027.