Tokenization stocks slide as legal concerns delay SEC innovation exemption

Tokenization-linked stocks have fallen as much as 11.2% after legal and market concerns reportedly delayed the SEC’s planned innovation exemption for blockchain-based securities.

According to fresh reports on Friday, the Securities and Exchange Commission was preparing to delay its innovation exemption again after the White House and Wall Street firms raised concerns about its legal basis and possible effect on securities markets.

The exemption was expected to reduce regulatory barriers for companies issuing and trading tokenized securities on blockchain networks. SEC officials were reportedly ready to disclose at least part of the plan alongside a separate meeting on Regulation Crypto before the agency canceled the session late Thursday.

According to reports, White House officials were concerned that the exemption could complicate congressional negotiations over the Digital Asset Market Clarity Act. SEC staff were also examining whether the agency had sufficient legal authority, economic analysis, and procedural support to grant relief covering major changes to securities trading.

The Securities Industry and Financial Markets Association, whose members include large broker-dealers and investment banks, had raised separate concerns, the report said. SIFMA questioned how blockchain venues would comply with existing equity-market rules, including brokers’ duty to seek the best available execution for customers.

Tokenization stocks extend their Friday losses

Bullish (BLSH) led the selloff, falling 11.2% to $24.42 by about 2:32 p.m. ET on Friday. The stock opened at $26.57 and reached an intraday low of $24.36, erasing gains recorded after the company released its second-quarter results.

Bullish is expanding into tokenized securities infrastructure through its planned acquisition of transfer agent Equiniti. Transfer agents maintain ownership records and process transactions such as share issuance, transfers, and dividend payments, making the business relevant to companies that want to represent regulated securities on blockchain networks.

Figure Technology Solutions (FIGR) traded 1.2% lower at $31.51 after moving between $30.65 and $33.04 during Friday’s session. Based on market data, the latest price was about 6.7% below Thursday’s session high of $33.78, although the stock had recovered from the steeper decline cited earlier in the day.

Coinbase (COIN) dropped 3% to $149.30, extending its decline from roughly 2% in early trading. The exchange has been developing a tokenized equities product and recently secured regulatory permission to establish an international tokenization hub in Abu Dhabi.

Circle Internet Group (CRCL) fell 4.8% to $71.79, after trading as low as $71.20. In addition to issuing the USDC stablecoin, Circle operates USYC, a tokenized money-market fund with approximately $3 billion in assets.

Securitize (SECZ) was down 1% at $5.65 after recovering from a Friday low of $5.17. Its shares had plunged about 27% during Thursday’s session after the company missed earnings estimates, though they briefly reversed a 5% decline early Friday.

Securitize reported second-quarter revenue of $14.4 million, down 5% from the previous year, and a net loss of $21.7 million. The company works with BlackRock on BUIDL, a tokenized Treasury fund, and serves as the transfer agent and tokenization platform supporting the product.

SEC exemption faces another regulatory delay

Market participants have been waiting for the innovation exemption to clarify how approved companies could issue and trade tokenized securities under temporary relief from parts of the existing regulatory framework.

SEC Chair Paul Atkins previously said a proposed structure could allow issuers to work with transfer agents or other tokenization providers before making securities available through approved blockchain venues. Investors would pass through a permitting process, while the temporary exemption would give the agency time to consider permanent rules.

Legal and ownership questions had already delayed the project once. In May, crypto.news covered an earlier delay after exchange officials and other market participants questioned whether third parties should be allowed to issue stock-linked tokens without consent from the underlying public company.

Part of the debate involves the difference between issuer-backed securities and synthetic products. An issuer-backed token can represent ownership of an actual share and preserve rights such as dividends and voting. A synthetic token may track a stock’s price without giving its holder ownership of the underlying security.

Securitize CEO Carlos Domingo supported taking more time when the earlier delay emerged, saying regulators needed to ensure the exemption applied to the correct instruments. Bullish CEO Tom Farley also backed an issuer-led model under which public companies would control the issuance of blockchain-based versions of their shares.

Friday’s reported setback introduces additional questions about procedure. Industry sources said that Wall Street firms wanted changes of this size handled through formal notice-and-comment rulemaking instead of an exemption, which could expose the agency to legal challenges over the limits of its statutory authority.

Canceled SEC meeting adds to policy uncertainty

Separate from the tokenization exemption, the SEC canceled its Aug. 14 meeting on a proposed offering framework for certain investment contracts involving crypto assets.

The agency said an unforeseen scheduling issue forced the cancellation and did not announce a replacement date. Commissioners had been scheduled to decide whether to publish the Regulation Crypto proposal, which would have opened a public rulemaking process rather than immediately creating binding requirements.

Federal regulatory records still list the SEC’s crypto-assets proposal, identified as RIN 3235-AN38, as pending review. The Office of Information and Regulatory Affairs received it on Aug. 12, and the proposal has no statutory deadline.

Atkins has previously described three possible routes under Regulation Crypto: a temporary exemption for startups, a separate fundraising exemption, and a safe harbor for investment contracts. Illustrative figures provided by the SEC chair included a startup exemption lasting as long as four years with a limit of about $5 million, along with another route allowing projects to raise as much as $75 million over 12 months.

No published proposal has confirmed those periods or financial thresholds. If commissioners later approve the document for publication, the SEC would still need to collect public comments before considering final rules.

The delay has also brought congressional action back into focus. Senate Majority Leader John Thune filed cloture on the motion to proceed with the CLARITY Act on Aug. 7, but the Senate adjourned without voting on the bill. The procedural vote is scheduled to ripen on Sept. 15 after lawmakers return.

Tokenization infrastructure continues developing

Regulatory delays have not stopped traditional exchanges and crypto companies from building systems for blockchain-based securities.

NYSE has continued work on onchain settlement infrastructure designed to support round-the-clock trading, immediate settlement, fractional shares, and stablecoin funding. The exchange also participated in a Depository Trust Company pilot that processed production transactions across several asset classes.

Nasdaq received SEC approval in March for a pilot that allows tokenized stocks to trade alongside conventional securities. NYSE is working with Securitize on a separate marketplace for tokenized stocks and exchange-traded funds.

Coinbase and its Base network have also been developing 1:1-backed tokenized equities intended to represent ownership of underlying shares. Coinbase has said its model would include dividend payments and shareholder rights, although the company has not provided a launch date or a final list of supported stocks.

Outside the United States, Coinbase’s Abu Dhabi authorization allows it to arrange investment transactions and provide custody for tokenized securities within the Abu Dhabi Global Market. The company says eligible holders will retain shareholder rights, including dividends and voting, while transfers will remain subject to sanctions screening.

Crypto.com launched tokenized derivatives tracking 1,500 U.S. stocks and ETFs for eligible customers in the European Economic Area and other approved markets in August. According to the exchange, the instruments offer synthetic price exposure rather than ownership of the underlying shares, meaning holders do not receive voting rights or direct legal ownership.