The Solana Policy Institute (SPI), in collaboration with industry leaders such as Phantom Wallet, Superstate, and Orca Exchange, has submitted a formal proposal to the U.S. Securities and Exchange Commission (SEC) advocating for regulatory clarity and exemptions for tokenized securities on blockchain networks. The initiative, part of "Project Open," seeks to modernize capital markets by enabling decentralized trading of traditional assets like stocks and bonds while maintaining investor protections.
Key Proposal Highlights
Decentralized Infrastructure Exemption
The proposal argues that blockchain networks like Solana operate as autonomous, non-custodial systems, eliminating the need for intermediaries such as brokers or clearinghouses.
Unlike traditional exchanges, decentralized protocols (e.g., DEXs and wallets) facilitate peer-to-peer (P2P) transactions without holding user funds, warranting a tailored regulatory approach.
SPI requests an 18-month pilot program allowing compliant tokenized securities issuance under modified SEC rules.
Compliance with Existing Regulations
While advocating for innovation, the proposal emphasizes adherence to core securities laws, including KYC (Know Your Customer) requirements and investor disclosures.
Issuers of "Token Shares" (digitized equities or bonds) must register with the SEC, ensuring transparency and fraud prevention.
Technological Advantages
Instant Settlement: Blockchain enables real-time T+0 settlement, a significant improvement over the traditional T+2 system.
Lower Costs & Enhanced Transparency: By removing intermediaries, transaction fees decrease, while on-chain records provide immutable audit trails.
24/7 Market Access: Unlike conventional markets, blockchain-based securities could trade around the clock.
Regulatory Landscape & Industry Momentum
SEC’s Evolving Stance: Under new leadership, the SEC has shown greater openness to crypto-related proposals, pausing enforcement actions to gather industry feedback.
Institutional Interest: The proposal aligns with growing institutional demand for tokenization, as highlighted by BlackRock CEO Larry Fink’s statement that "every asset will be tokenized." CME Group and other TradFi giants are also exploring blockchain-based securities.
Potential Implications
If approved, the framework could:
✅ Enable publicly traded stocks (e.g., Google, Tesla) to be issued and traded on-chain.
✅ Accelerate DeFi adoption by bridging traditional finance with decentralized protocols.
✅ Set a global precedent for securities regulation in the digital asset space.
Challenges Ahead:
Regulatory Uncertainty: The SEC must clarify how P2P trading fits within existing laws.
Technical & Legal Risks: Issues like network fees, smart contract vulnerabilities, and cross-border compliance remain unresolved.
Next Steps
The proposal is now under SEC review, with potential pilot implementation in 2025. Industry participants await further guidance, which could shape the future of on-chain finance.