During her keynote address in Washington D.C. on May 8, 2025, U.S. Securities and Exchange Commission (SEC) official Hester Peirce outlined a proposed regulatory exemption framework for the trading of crypto-linked securities, aiming to strike a balance between safeguarding investors and encouraging technological advancement.
SEC Considers Regulatory Sandbox for Tokenized Securities as Industry Advocacy Grows
The importance of “sensible regulation” was stressed by Commissioner Hester Peirce as essential to preserving the global competitiveness of U.S. capital markets. A 20-year decrease in public company listings was cited as a driving factor behind her call to reassess existing disclosure requirements. She warned that excessively strict regulations could hinder business expansion and discourage companies from pursuing public listings, whereas appropriately scaled rules for smaller firms could be used to promote greater market competition.
At the core of her address was a proposed exemptive order aimed at permitting companies to trial tokenized securities—conventional assets such as stocks digitized using blockchain—within regulated environments. Temporary relief from specific registration requirements is being considered by the SEC’s Crypto Task Force, allowing firms to explore the use of distributed ledger technology (DLT) for the issuance, trading, and settlement of securities.
Entities granted exemptions would be required to follow anti-fraud protocols, disclosure obligations, and financial protections. “The proposed exemption would be conditional in nature. Entities receiving such exemptions would be expected to meet market integrity standards designed to prevent fraud and manipulation,” stated Peirce during the SEC’s 31st International Institute for Securities Market Growth and Development.
Additional conditions might include requirements to provide material and relevant disclosures to users about a platform’s products, services, operations, conflicts of interest, and risks, including smart contract risks; comply with recordkeeping and reporting requirements; be subject to monitoring and examination by SEC staff; and have adequate financial resources for operations.
Peirce added:
The framework has been modeled after international “regulatory sandboxes,” which permit innovators to function in active markets under customized supervisory conditions. Peirce proposed that cross-border cooperation might simplify market access for companies operating across various jurisdictions, though such collaboration would necessitate strengthened coordination among regulators.
The conditions tied to exemption would require the inclusion of risk disclosures, clear operational transparency, and limits on trading volume to reduce investor exposure. Feedback is intended to be collected by the SEC prior to the finalization of the rules, which may be adjusted over time as the market for tokenized securities continues to evolve.
 official Hester Peirce outlined a proposed regulatory exemption framework for the trading of crypto-linked securities, aiming to strike a balance between safeguarding investors and encouraging technological advancement.){kind=link}