The US Securities and Exchange Commission (SEC) is reviewing a potential exemption order allowing firms to issue and trade securities using distributed ledger technology (DLT).
Peirce acknowledged that current rules, such as those under Regulation National Market System, create obstacles for companies interested in automated market-making models. Many of these firms may be required to register as broker-dealers, clearing agencies, or exchanges, which involves lengthy and costly compliance processes.
The current barriers, along with the limited availability of tokenized securities and trading venues, have discouraged many firms from entering the space.
She said:
“Exemptive relief could help resolve this chicken-and-egg problem. It also would afford the SEC time to develop and adopt durable adaptations to its existing rules to accommodate DLT.”
Meanwhile, the proposed exemption would not be without safeguards. Peirce stressed that any firm granted relief must follow strict guidelines to ensure transparency, financial responsibility, and investor protection.
Additionally, the firms must disclose how their platforms operate, provide details on wallet and custody arrangements, and outline any blockchain-specific risks. These entities would be subject to SEC supervision and expected to maintain adequate capital to support their services.
Peirce also pointed out that the agency is considering requirements to prevent fraud and market manipulation. This includes mandatory customer disclosures and robust monitoring protocols.
She concluded:
“This sketch of a potential exemption is a work-in-progress. The goal is to formulate a commercially feasible approach that protects investors, including by ensuring that they have the benefit of cutting-edge technologies for trading, clearing, and settling securities. I welcome feedback from market participants and other interested parties.”
