Last night the SEC postponed a meeting scheduled for today that was to discuss the creation of “a tailored offering regime for certain investment contracts involving crypto assets.” This likely relates to a trio of exemptions for early cryptocurrency fundraising involving investment contracts that SEC Chair Atkins discussed in March. Earlier this week Bloomberg suggested that a second agenda item might be the previously delayed tokenized stock innovation exemption, so the exemption has also been postponed.
The tokenized stock innovation exemption is intended to support the trading of these securities via DeFi automated market makers (AMMs). One of the challenges relates to pricing, with listed securities subject to Regulation NMS, in particular a rule that bars a trading venue from executing an order at a price worse than the best automated quote displayed at another venue. Given that pricing on AMMs works differently, that rule would have been problematic. In June the SEC published a proposed rulemaking to scrap two NMS rules which would largely remove the pricing obstacle. The 60 day comment period ended this week.
A key issue with AMMs is that thin liquidity pools can result in prices that significantly deviate from mainstream prices. Hence, the first comparatively safe proposal floated by Chair Atkins and Commissioner Peirce in February limited the exemption to issuer sponsored tokens. That way issuers could effectively opt in.
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