From the SEC's new policy on tokenized stocks, the regulatory trend of RWA: Accelerated integration of traditional finance and DeFi

The U.S. Securities and Exchange Commission (SEC) has recently signaled a clear intention to allow tokenized stocks to be traded in decentralized finance (DeFi) environments through an "innovation exemption" framework. This move is not an isolated policy adjustment but a systematic response by regulators to the wave of on-chain real-world assets (RWA).

For a long time, the main obstacle facing tokenized assets has not been technological capability but the lack of a compliant pathway. Once any traditional security is tokenized and enters a public trading scenario, it easily risks crossing the red lines of securities laws and exchange regulations. The core breakthrough of this SEC framework is that it no longer requires each issuance of tokenized stocks to be individually authorized by the original listing company but instead establishes a universal compliance channel applicable to multiple asset classes.

This shift signifies an evolution from "case-by-case approval" to "pre-established rules" in regulatory logic. For RWA on-chain, expected compliance costs will be significantly reduced, enabling asset issuers and DeFi protocols to design product structures within clear boundaries.

How dual conditions change the issuance logic of tokenized stocks

The proposed SEC framework sets two seemingly contradictory but actually mutually supporting core conditions: allowing third parties to issue tokenized stocks without the authorization of the listed company, while mandating that these tokenized stocks must provide complete shareholder rights, including voting and dividends.

The first condition breaks the traditional financial norm that "asset issuance must be authorized by the original rights holder." In an on-chain environment, any third party holding sufficient underlying stocks can issue corresponding tokenized stocks through compliant custody and tokenization protocols. This mechanism greatly lowers the entry barrier for assets to be on-chain, allowing liquidity providers to operate without relying on the cooperation of the listed companies.

The second condition ensures that token holders obtain legal status equivalent to traditional shareholders. Tokenized stocks are not "diluted" assets but are bound by smart contracts and legal agreements that embed rights such as dividend distribution and voting proxy. This design alleviates market concerns about "hollowed-out" rights in tokenized assets over the long term.

How this breakthrough will connect DeFi with real-world asset liquidity

The DeFi ecosystem has long been constrained by the dilemma of "native crypto asset circulation." Protocols for stablecoins, lending, derivatives, etc., heavily depend on cryptocurrencies like ETH and BTC as underlying collateral, lacking deep connections with traditional economic systems.

Once tokenized stocks enter DeFi at scale, at least three major liquidity structure changes are anticipated. First, traditional stocks can serve as high-quality collateral in lending protocols, with price volatility and liquidation mechanisms superior to most native crypto assets. Second, tokenized stocks can be directly exchanged with stablecoins or other tokenized assets on decentralized exchanges (DEXs), forming an on-chain stock trading market. Third, liquidity pools can be built around tokenized stocks to develop yield strategies such as staking dividends, liquidity mining, and arbitrage trading.

The realization of these scenarios depends on a regulatory framework that provides sufficient legitimacy for trading. Once the SEC’s exemption pathway is officially operational, DeFi protocols will gain a foundational legal basis to access the trillions of dollars in traditional stock markets in a compliant manner.

Will traditional financial intermediaries disappear or transform?

The feature that tokenized stocks do not require the issuer’s authorization has sparked discussions about the value of traditional financial intermediaries. From a logical perspective, intermediaries will not vanish but will undergo profound transformation.

Central securities depositories, transfer agents, and brokers currently handle asset confirmation, clearing, settlement, and compliance review. On-chain, smart contracts and distributed ledgers can automate some of these functions—for example, locking underlying stocks via custody contracts and issuing tokenized certificates. However, critical functions—such as physical custody of underlying assets, legal transfer of dividend funds, and proxy voting—still depend on qualified traditional institutions.

A more likely evolution path is that traditional intermediaries shift from "process controllers" to "service providers." They will no longer monopolize every step of asset transfer but will offer specialized services like custody endorsement, legal compliance, and rights enforcement for on-chain protocols, thereby creating new revenue streams.

What are the current distribution characteristics of on-chain tokenized stocks?

As of May 2026, the on-chain tokenized stock market has formed an initial ecosystem matrix. In terms of asset types, large-cap tech stocks (e.g., Apple, Microsoft, NVIDIA) and broad-based index ETFs (e.g., SPY, QQQ) dominate due to their high liquidity and widespread market recognition.

Regarding implementation methods, different platforms show clear differences in how shareholder rights are executed. Some adopt a "custody + certificate" model: underlying stocks are held by compliant custodians, with on-chain tokens serving solely as proof of rights; dividends and voting are processed through traditional channels and then reflected onto token holders. Others attempt to encode voting rights directly into token contracts, allowing holders to submit voting instructions on-chain, which are then aggregated by proxy nodes and transmitted to shareholder meetings.

Currently, there is no unified standard for rights realization, and this diversity reflects both innovation and regulatory arbitrage risks. The SEC’s mandatory shareholder rights requirements will likely push the market toward convergence on at least a few recognized compliant solutions.

What are the practical execution challenges of on-chain shareholder rights?

While the requirement to provide voting and dividend rights appears clear on paper, there are multiple operational challenges in on-chain execution.

The core challenge for dividend rights lies in timing synchronization and identity verification. Traditional stocks determine dividend record dates, ex-dividend dates, and distribution dates, which must be precisely aligned within smart contracts for tokenized stocks. Additionally, dividends are paid in fiat currency, but token holders expect to receive stablecoins or native tokens, involving cross-chain transfers and legal compliance costs.

Voting rights face difficulties mainly in identity mapping and execution efficiency. Shareholder meetings require voters to be legally recognized shareholders, but blockchain addresses are typically pseudonymous. Feasible solutions include mapping addresses to verified identities via compliant custodians or adopting proxy voting models, where licensed institutions collect on-chain instructions and vote on behalf of token holders.

These execution challenges are not insurmountable but require further guidance and exemption protections from the SEC to reduce legal risks associated with compliance experiments.

Could this framework serve as a regulatory model for other RWA categories?

Tokenized stocks are among the most complex RWA categories to bring on-chain due to their direct involvement with securities law, corporate law, and investor protection. If the SEC successfully establishes a workable exemption pathway for tokenized stocks, this regulatory framework is highly likely to be extended to other RWA categories such as bonds, fund shares, and commodity certificates.

The core differences among asset classes lie in rights definitions and regulatory jurisdictions. Bonds focus on coupon payments and maturity redemption; fund shares emphasize net asset value calculations and redemption mechanisms; commodity certificates concern storage and quality inspection. The "no authorization issuance + mandatory rights on-chain" dual-condition model established in tokenized stocks essentially forms a parameterized compliance framework.

Future evolution may involve the SEC issuing differentiated exemption rules for various asset types, but all sharing the same fundamental logic—allowing third parties to issue tokenized versions based on legally held underlying assets and enabling free trading within compliant DeFi environments, while safeguarding investor rights.

Summary

The SEC’s plan to enable tokenized stocks to be traded in DeFi marks a significant regulatory breakthrough for large-scale on-chain RWA. By allowing third-party issuance without prior approval from the listed company and mandating the provision of voting and dividend rights, regulators have found a feasible balance between lowering on-chain entry barriers and protecting investors. This framework will propel the DeFi ecosystem from internal crypto circulation toward deep integration with traditional finance, while also pushing custodians, clearinghouses, and rights enforcement intermediaries toward on-chain compliance. Although the specific implementation of shareholder rights still faces technical challenges, the experience gained from tokenized stocks is likely to serve as a regulatory model for bonds, funds, and other RWA categories, paving the way for compliant on-chain assets worth trillions of dollars.

FAQ

Q: What is the fundamental difference between tokenized stocks and traditional American Depositary Receipts (ADRs)?

A: ADRs are traditional financial instruments issued by banks representing the equity of foreign companies listed in the U.S., with issuance and trading conducted within the conventional securities system. Tokenized stocks, on the other hand, realize digital representation of assets via blockchain technology, allowing direct trading, collateralization, or bundling within DeFi protocols without relying on traditional clearing and settlement systems. While similar in asset attributes, they differ significantly in transfer efficiency and programmability.

Q: How are shareholder rights (voting and dividends) implemented and executed on-chain via smart contracts?

A: Dividend rights are typically realized through a "fiat-stablecoin" conversion pathway: custodians receive dividends in fiat from the issuer, then convert to stablecoins via compliant channels, and distribute proportionally to token holders’ on-chain addresses. Voting rights are often implemented through proxy voting: token holders submit instructions via smart contracts, licensed proxy agents collect and cast votes at shareholder meetings, and results are published on-chain. Both methods require legal agreements and code logic to be tightly integrated.

Q: How can ordinary investors participate in DeFi trading of tokenized stocks?

A: Investors need to access tokenized stocks through compliant channels such as regulated exchanges or licensed brokers. Once obtained, they can transfer these assets into DeFi protocols supporting tokenized stocks for trading, lending, or yield strategies. The specific process depends on platform availability and regulatory approval. Investors should prioritize protocols with regulatory clearance or exemption status to avoid unlicensed issuance risks. Real-time market data and trading pairs can be checked on platforms like Gate.

Q: Do listed companies have the right to oppose third-party issuance of their stocks in tokenized form?

A: According to the SEC’s proposed exemption framework, third-party issuers that meet the core conditions—such as providing full shareholder rights—do not need prior approval from the listed company to issue tokenized stocks. This means companies do not have a "veto" right in this context. However, companies can still express opposition through public statements, investor communications, or legal actions. Ultimately, compliance depends on whether the issuance strictly adheres to SEC’s exemption criteria.