CFTC Chair Urges Tokenization; SEC OKs Tokenized Stock Pilot

CFTC Chair Michael Selig told the U.S. Treasury Market Conference that financial markets should prepare for “mass tokenization” of real-world assets and that the commission will pursue principles-based rules for onchain finance. On Sept. 17 the CFTC submitted a regulatory action on crypto asset transactions and markets to the White House for review; that filing remains at the “prerule” stage and does not detail planned regulations.

Selig outlined potential benefits of tokenization, saying it can enable near-instant settlement and permit collateral to move in real time between clearinghouses, intermediaries and users. “Just as the transition from hand signals to electronic trading advanced our financial system, I believe tokenization can do the same for all asset classes,” he told the conference. He also warned the agency will act under its existing authority if Congress does not pass new legislation, noting the Senate did not advance the CLARITY Act on Sept. 15.

On the same day, the Securities and Exchange Commission granted a temporary Innovation Exemption to allow limited trading of digital representations of U.S.-listed stocks on select platforms under defined conditions. The exemption is intended to let firms test tokenized trading while regulators continue to work on longer-term rules.

Jamie Selway, director of the SEC’s Division of Trading and Markets, told a television interview that tokenization and crypto have recently become politicized but are “not naturally a politicized function.” He urged bipartisan support for U.S. efforts to develop these markets. Earlier this year, SEC Chair Paul Atkins indicated a temporary exemption could help facilitate onchain trading while the agency finalizes permanent regulation.

Tokenization creates digital tokens on a blockchain that represent ownership of physical assets, securities or other instruments. Proponents point to shorter settlement times, reduced counterparty risk and faster collateral transfers. Regulators have cited potential risks, including market integrity, custody arrangements and investor protection, and are weighing those risks against the efficiency and settlement benefits.

Both agencies indicated a preference for adapting existing regulatory frameworks rather than creating wholly new regimes. The CFTC described a principles-based approach intended to set core standards while allowing industry development. The SEC’s temporary exemption creates a controlled environment for trading tokenized stocks, subject to conditions meant to protect market structure and investors.

Next steps for regulators include refining proposed rules, advancing prerule filings through review processes and monitoring pilot programs that use tokenized assets. Platforms that seek to trade tokenized U.S. stocks must comply with the Innovation Exemption’s requirements and any additional conditions set by exchanges or regulators.