Sec exemption permits tokenized stock trading on public chains
The sec has authorized a temporary exemption allowing trading apps to operate on public permissionless blockchains for tokenized equities. The move caps initial volume but is expected to drive settlement activity to ethereum's mainnet.
The securities and exchange commission announced an innovation exemption in mid-september that remains in effect until 2031. The rule permits trading applications to function on public permissionless blockchains while maintaining permissioned access for traders. Participation is initially restricted to 75 large company stocks, with a volume limit of 0.25% of daily trading, and 250 other stocks capped at 2.5% of daily volume.
David Duong noted that while retail trading may occur on layer 2 networks due to speed and cost advantages, large settlement and collateral activities will likely remain on the ethereum mainnet. He stated that ethereum benefits regardless of where trades occur because layer 2s settle back to the main chain using eth. Duong argued that the exemption is a positive development for the ecosystem, as it validates the role of tokenized assets and drives settlement activity to the mainnet. He described the dynamic by saying, "Whether the stock trades on a side street or on the main highway, i.e. the L1, I think it's still basically driving through the ethereum roadmap." Robinhood's crypto head has indicated that trading volume will hit these regulatory limits quickly.