Many media outlets have misunderstood the SEC's attitude towards stock tokenization.
The SEC has not halted stock tokenization but has reiterated that turning stocks into tokens does not change their 'security' nature, and compliance pathways must be followed.
However, the compliance threshold is very high, and currently, there are no trading platforms for on-chain stocks approved for retail investors.
The application submitted by Coinbase in June is still under review, and whether it will be approved and when it will be approved should still depend on the SEC's leniency regarding registration, custody, Reg NMS/ATS, and other details.
In the current regulatory environment, SEC Chairman Paul Atkins stated that tokenization is the next step in market modernization but emphasized that investor protection must not be sacrificed; the industry association SIFMA publicly opposes rapid exemptions and suggests following the formal rule-making process. The former keeps options open while the latter tightens regulations, which is a relatively normal regulatory stance.
Regulation is primarily concerned with the following four areas:
1. Do tokenized stocks require an S-1 / Reg A prospectus?
2. Can trading occur 24×7 on-chain?
3. Can on-chain wallet custody replace traditional DTCC?
4. Issues of matching real-name information regarding KYC/AML, shareholder registries, tax declarations, etc.
Whether this path can continue largely depends on the progress of Coinbase's application and the SEC's public inquiries. At least based on the current situation, the possibility of on-chain stock trading is still quite significant.
