World Exchange Alliance: SEC should not allow crypto companies to “bypass” existing rules

The World Federation of Exchanges (WFE) sent a letter this week to the U.S. Securities and Exchange Commission (SEC), stating that the SEC may plan to grant regulatory exemptions to crypto companies selling “tokenized” stocks, which could harm investor interests. Several crypto companies plan to sell crypto tokens pegged to listed stocks to retail investors, allowing them to gain exposure without directly owning the shares. However, to sell these products in the U.S., crypto companies not registered as broker-dealers require a no-action letter or exemption from the SEC. SEC Chairman Paul Atkins has stated that the agency is developing an “innovation exemption” under securities law to allow crypto industry players to experiment with new business models. In its November 21 letter, the WFE stated that such an exemption could pose a risk to market integrity and harm investor protection. WFE members include U.S. Nasdaq and German Deutsche Boerse. WFE CEO Nandini Sukumar told Reuters, "The SEC should avoid granting exemptions to companies trying to circumvent regulatory principles that have protected markets for decades." The SEC published WFE's letter on its website but declined to comment. WFE stated its position "supports innovation" and called tokenization "a natural evolution of capital markets." James Auliffe, head of WFE's technology working group, said, "We and crypto platforms should compete on a level playing field, and we should abide by the same rules." Issuers of tokenized stocks say that integrating blockchain technology into the stock market can improve trading efficiency. Auliffe stated that the current stock market is already very efficient. (Reuters)