U.S. Lawmakers Weigh Tokenization Push as SEC Prepares Innovation Exemption Plan

The House Financial Services Committee held a hearing on March 25, 2026, titled “Tokenization and the Future of Securities: Modernizing our Capital Markets,” as lawmakers and regulators accelerate discussions on bringing tokenized assets into the U.S. financial system amid growing industry demand for clearer rules.

Representatives from both parties acknowledged that tokenization of securities is already underway, with Republican Rep. Andy Barr stating: “No doubt tokenization of securities is coming. It’s here, and our modernization of our securities regulation is required, both in terms of preserving that gold standard of investor protection, but also making sure that the United States is leading the way.” The Securities and Exchange Commission (SEC) is preparing to roll out a potential innovation exemption that could function as a regulatory sandbox for onchain assets, while some lawmakers raised concerns about investor protection and conflicts of interest.

Hearing Highlights and Lawmaker Perspectives

Support for Modernization

The hearing convened members of the House Financial Services Committee to examine how tokenization could reshape capital market infrastructure. Committee members shared the view that tokenization represents a key technology for modernizing securities markets. Rep. Andy Barr (R-Ky.) emphasized that regulatory modernization is required to ensure the U.S. remains competitive while preserving investor protections.

Concerns and Cautions

Rep. Brad Sherman (D-Calif.) raised concerns about the proposed innovation exemption, stating: “I’m concerned that we’re creating a two-tiered market where tokenized securities on blockchain platforms are exempted from core securities regulations.” Rep. Maxine Waters, the top Democrat on the committee, questioned whether tokenization provides tangible benefits to businesses and investors rather than just “middlemen.” She drew a parallel to securitization before the 2008 financial crisis, which she said “allowed Wall Street to build a process that legitimized predatory loans, stripped wealth from middle-class homeowners, and created the conditions for the worst economic catastrophe since the Great Depression.”

Waters also raised ongoing concerns about potential conflicts of interest involving President Donald Trump’s crypto ventures, including his family’s World Liberty Financial. “When officials in the government who are approving the rules also profit from the market those would regulate, the American people rightly ask whose interests truly come first,” she said.

SEC Regulatory Developments

Innovation Exemption

SEC Chair Paul Atkins has indicated that the agency will soon seek public comment on a range of issues tied to future rulemaking, including a proposed innovation exemption that could function as a regulatory sandbox for onchain assets. The initiative is part of the SEC’s broader effort to adapt legacy frameworks to emerging technologies while maintaining investor protection standards.

Recent Approvals

The SEC has already taken steps to accommodate tokenized securities. In December 2025, the agency authorized the Depository Trust & Clearing Corporation (DTCC) to tokenize certain highly liquid assets on pre-approved blockchains under a three-year pilot. The SEC also recently approved a rule change allowing Nasdaq to support trading of tokenized shares. Separately, the New York Stock Exchange has said it is developing a platform for trading and onchain settlement of tokenized securities.

Industry and Traditional Finance Responses

SIFMA’s Cautious Stance

The Securities Industry and Financial Markets Association (SIFMA), which represents traditional finance firms, has urged the SEC to take a transparent process through public comment and engagement rather than granting exemptive relief without broader input. SIFMA President Kenneth Bentsen, Jr., testified during the hearing: “This is an ever-evolving industry, and so it’s absolutely essential that we are constantly evolving. But at the same time we want to do it on the basis of the legal and regulatory framework that we have.”

Industry Calls for Clarity

Blockchain Association CEO Summer Mersinger warned that without clearer rules, innovation will continue to shift overseas. In prepared testimony, she stated: “We must act now to foster that growth with regulatory clarity. If we fail to establish regulatory clarity, the outcome is certain: innovation in this space will continue, but it will happen abroad, and America will be left behind.”

Frequently Asked Questions

What is the SEC’s proposed innovation exemption?

The innovation exemption is a planned regulatory sandbox that would allow certain onchain assets to operate under tailored rules. SEC Chair Paul Atkins has said the agency will seek public comment on the proposal, which is part of broader efforts to adapt securities laws to emerging technologies while maintaining investor protections.

What concerns did lawmakers raise about tokenization?

Lawmakers expressed concerns about creating a two-tiered market where tokenized securities receive lighter regulation than traditional securities, the potential for investor harm based on past financial innovations, and conflicts of interest involving government officials with crypto business ties.

What recent SEC actions have supported tokenized securities?

The SEC has authorized DTCC to tokenize certain assets under a three-year pilot, approved Nasdaq’s rule change to support trading of tokenized shares, and previously issued guidance clarifying that tokenized securities remain subject to securities laws. The New York Stock Exchange is also developing a platform for tokenized securities trading and onchain settlement.