Crypto gains window for on-chain stock trading

March 31, 2026 (MLN): The Securities and Exchange Commission (SEC) is expected to soon propose a rule that could allow Coinbase Global and other crypto firms to trade “tokenized” stocks under a temporary innovation exemption, easing their immediate compliance with traditional securities regulations.

The move would grant digital-asset companies a limited period to experiment with on-chain trading before either adhering to standard rules or demonstrating that full compliance is unnecessary.

The proposed exemption is anticipated to include asset caps and other limits, according to Barron’s.

The potential innovation exemption has drawn opposition from traditional finance firms and the Securities Industry and Financial Markets Association (SIFMA), who have argued that it could deprive investors of protections typically afforded in stock markets, such as best-execution guarantees.

Concerns have also been raised that shifting stock trading to the blockchain could erode profits for established financial firms.

Since January, the crypto industry and banks have clashed over regulatory provisions, including whether crypto firms should be allowed to pay yields on stablecoin deposits.

Banks have warned that such payments could drain deposits, while crypto firms have argued that the risk has been exaggerated and that banks primarily seek to limit competition.

Proponents of tokenized stock trading argue that blockchain-based markets could enable 24/7 trading, instant settlement, simplified collateral use, and fewer intermediaries.

Coinbase has positioned itself as an “everything exchange,” offering traditional stock trading through a broker-dealer subsidiary while aiming for fully integrated on-chain stock trading in the future.

Some tokenized stock products already exist outside the U.S., such as those offered by crypto platform Kraken.

However, these are generally synthetic tokens backed by stocks rather than granting actual equity ownership or associated rights.

Other firms aim to place real stocks directly on-chain, requiring relief from legacy regulatory frameworks that separate the roles of broker, exchange, and custodian.

SEC officials have described the innovation exemption as a small, incremental step.

SEC Commissioner Hester Peirce compared it to a storage container whose contents are uncertain neither a complete solution for crypto firms nor an existential threat to traditional finance.

SEC Chairman Paul Atkins noted that the exemption would allow a proof-of-concept period for on-chain trading, providing data for potential future rule-making.

While the change may initially be modest, it has the potential to reshape traditional stock trading over time.

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