SEC Introduces Tokenized Securities Platform and Compliance Framework for ICOs

Article by Meng Yan

The U.S. Securities and Exchange Commission (SEC) has recently introduced an exemption for tokenized stock trading. For teams building exchanges, particularly RWA trading platforms, this is certainly noteworthy. However, being "in this space" is likely much further from being "eligible for this exemption" than one might assume. Does having an existing trading system and RWA business alone qualify?

For the Chinese-speaking crypto community, the most significant implication of this move may not lie in how many teams directly participate, but rather in what it reveals about the SEC’s stance: although legislative action in Congress has stalled, the SEC has no intention of standing still. This signal also makes the currently advancing public fundraising rules even more noteworthy—will they accelerate implementation, and what changes will they bring to projects and retail investors?

TSV stands for Tokenized Securities Venue, which can be translated as "Tokenized Securities Trading Venue." The SEC's order issued on September 17, 2026, provides a temporary exemption from the definition of "exchange" under the Securities Exchange Act of 1934 for eligible venues of this type, as well as a temporary exemption from the definition of "dealer" for specified liquidity providers, for a period of five years. It permits approved participants to trade tokenized U.S. National Market System stocks, known as Tokenized NMS Stock, through automated market makers (AMMs) and liquidity pools.

This does create an opening for trading platforms, but it does not grant a blanket pass to all crypto exchanges, let alone all RWA platforms. Even if you already have users, a trading system, and on-chain assets, the following barriers will not disappear as a result.

First, what asset are you actually trading? TSV’s core focus is on tokenized NMS stocks that meet the defined criteria, not all assets labeled as RWA. Products such as real estate shares or private credit cannot qualify for this exemption merely by being “on-chain real assets.” Even if related to U.S. equities, tokens issued by third parties that offer only synthetic exposure to stock prices fall outside the definition of Tokenized NMS Stock. Holders must receive the same rights as their traditional stock counterparts, including dividends, voting rights, and entitlement to residual assets in the event of liquidation. Simply tracking the price of U.S. equities is fundamentally different from fully enforcing shareholder rights. The platform must verify these rights—it cannot rely solely on claims of “asset backing.”

Second, having a token does not mean it can be listed automatically. If a stock is tokenized by a third party unrelated to the underlying issuer, the platform must provide prior written notice to the underlying issuer and wait at least thirty calendar days after sending the notice; if the issuer raises an objection within this period, the tokenized stock cannot be listed or traded on the platform. For platforms seeking to rapidly expand their asset offerings, this means they must complete product design, rights verification, and communication with the underlying issuer—rather than simply selecting a popular asset, tokenizing it, and listing it immediately.

Third, existing trading systems may not be the systems supported by this exemption. TSV must adopt an AMM liquidity pool to facilitate trading for authorized participants and establish access criteria; the relevant smart contracts must be public, auditable, and deployed on a public, permissionless distributed ledger. While the public blockchain may be permissionless, access to the trading interface is not open to anyone who simply connects a wallet. The platform must outline the procedures, screening methods, and applicable sanctions compliance arrangements for approving participants and wallets. Therefore, existing order-book trading systems cannot directly replace the AMM model here, nor can an open pool without participant access controls be implemented as-is.

Fourth, the U.S. person requirement is only the beginning—ongoing regulatory compliance is the next step. TSV must qualify as a U.S. person as defined by the order; incorporation under U.S. law is one such scenario, so overseas teams may explore using a U.S. entity to meet this condition, but already possessing an offshore entity does not automatically satisfy the requirement. More importantly, the platform must comply with applicable U.S. sanctions, maintain transaction and compliance records within the United States, retain these records for three years both during and after the exemption period, and agree to allow SEC staff to conduct inspections at any time. If any relevant party or individual is subject to statutory disqualification, they must also meet the exception conditions specified in the order to rely on the exemption. Registration can be arranged, but the ability to maintain records, conduct screenings, and sustain ongoing regulatory compliance must be built through actual operations.

Fifth, exemption from exchange registration does not equate to exemption from ongoing compliance. At least thirty calendar days before commencing operations, the platform must publish the required public notice on its website and provide written notice to the SEC within one business day after publication, followed by periodic updates as required. Trading data from the past thirty days must be made publicly available free of charge in U.S. dollar-denominated, machine-readable format and updated within ten minutes of each trade. When the underlying stock is halted on a primary exchange, the corresponding tokenized stock must also be halted simultaneously. The venue must not extend credit to participants for purchasing such stocks, nor may it lend, pledge, or arrange the pledge of securities or non-securities crypto assets within the venue.

If liquidity providers rely on a complementary dealer exemption, their related securities activities must be limited to trading within the designated TSV pools, conducted solely through proprietary accounts, and they may not hold or custody client assets. A team seeking to consolidate trading, leverage, client assets, and market-making activities under this exemption must reevaluate its business structure.

Sixth, even after crossing the threshold, the platform cannot be planned for unlimited expansion. The regulations establish two tiers of limits based on the U.S. market’s existing volatility control framework: Tier One allows a maximum of seventy-five trading symbols, with a trading volume cap of 0.25% per security; Tier Two allows a maximum of two hundred fifty symbols, with a cap of 2.5%. The ratio is calculated by comparing the average daily trading volume of the corresponding tokenized shares on the platform to the average daily market trading volume of the underlying stock over the prior month. Trading volume and symbol counts associated with TSV must be aggregated. These are scale limits, not minimum capital requirements, yet they constrain the platform’s capacity to support business. Attempting to circumvent these limits by operating multiple affiliated platforms is also not permitted.

Looking at these requirements together, the challenges are clear: the team must simultaneously address securities rights, communication with underlying issuers, AMM and participant access, recordkeeping and operations under U.S. regulation, and business arrangements under constrained scale. Simply having an exchange—or even already engaging in RWA—does not mean these capabilities are already in place.

Based on an understanding of the industry’s actual readiness, most overseas Chinese startup teams currently find it difficult to directly fit their existing platforms into this framework; to truly participate, they often need to adjust their asset structures, trading systems, and compliance operations. The challenges stem from the gap between these specific requirements and their current business models—not from the founders’ Chinese identity. The phrase “TSV is not relevant to you” specifically addresses the expectation that a limited exemption can be directly treated as a business advantage.

However, just because it cannot be directly utilized does not mean it can be ignored. The policy signals from TSV may be more significant than the number of platforms it can directly benefit.

Two days before this order was issued, on September 15, the U.S. Senate failed to pass a procedural vote to advance the CLARITY Act. Following this, SEC Chairman Paul Atkins, in his statement introducing the exemption, directly referenced Congress’s failure to advance CLARITY and stated that the SEC would continue acting within its existing statutory authority.

Viewing the setback of the CLARITY Act as a halt to all crypto regulatory reform clearly fails to explain this recent action. Congress has its own legislative process, and the SEC has authority granted under existing laws; just because one path is temporarily blocked doesn’t mean the other must wait. The significance of TSV lies in the SEC turning this stance into concrete action.

Therefore, saying “let’s wait until CLARITY passes” when applied to other rules under development may not be prudent—it could instead conflate two separate processes. Most notably, the fundraising proposal, which has already entered the public comment phase, directly addresses how crypto projects issue tokens and raise funds, impacting projects and ordinary participants more broadly than a stock trading arrangement ever could.

RCA stands for Regulation Crypto Assets, which can be translated as the "Regulation on Crypto Assets." This is a rule proposal introduced by the SEC in August 2026 and is currently open for public comment, with the comment period ending on October 20. It has not yet taken effect, but it has proposed two types of securities registration exemptions aimed at providing a clear pathway for crypto project token offerings under certain conditions.

This arrangement is necessary because whether a token itself is a security is not the same question as whether the fundraising surrounding it is subject to securities laws. For example, if a team sells tokens while promising to develop a network and build a product, and investors contribute funds expecting returns from those efforts, the entire fundraising arrangement may still constitute an "investment contract," even if the token itself is not a security. The two registration exemptions under the RCA apply specifically to arrangements that meet this definition: the underlying token is not a security, and the contract does not involve any assets other than the token. Issuers relying on these exemptions must still fulfill corresponding disclosure obligations and continue to bear responsibilities such as anti-fraud requirements.

For the community, the most significant aspect of these two exemptions is that they both allow ordinary investors—those who do not qualify as accredited investors under U.S. securities law—to participate. This enables projects to raise funds from the public by issuing tokens, provided they meet the necessary conditions, without limiting participation to institutional or high-net-worth investors. In this sense, RCA offers a conditional pathway to a "compliant ICO."

If this pathway is implemented, users of the product will have the opportunity to provide funding for the project’s early development while assuming investment risk; in return, the teams receiving these funds must disclose information to participants and continuously communicate what they are doing. If a project has the chance to receive funds from ordinary users, it must clearly articulate its corresponding commitments and responsibilities.

Allowing public participation and having your project qualify to raise funds from the public are two different things. The two types of exemptions differ significantly in terms of eligibility, funding limits, and compliance obligations—differences that directly determine whether a project can proceed and how much preparation is required.

The primary requirement here is to distinguish the entity from the investor’s jurisdiction. Neither of the two current sets of rules restricts investors exclusively to U.S. citizens or residents, nor does it exclude foreign individuals and institutions as a category; the stricter U.S. connection requirements described below apply to the issuer of the fundraising. Foreign participants should therefore be aware of these rules, but when actually issuing or investing, they must still comply with the applicable regulations of their respective jurisdictions and distribution channels, as RCA addresses only U.S. securities registration obligations and does not supersede other local laws.

1. Startup: Begin with a small scale; requirements for the main entity are more flexible

Startup exemption can be translated as “startup exemption.” Under the current proposal, issuers using this pathway may be entities, individuals, or teams composed of individuals or entities; there is no requirement to first establish a company, nor are they subject to the U.S. registration, personnel, asset, and principal management location requirements mandated for fundraising. Therefore, even a project without a U.S. company may still need to evaluate its eligibility under the startup exemption. Of course, if filing under the collective identity of a team, each member must sign the filing and certification as required and assume corresponding responsibilities.

The scope is relatively broad, but the fundraising amount is subject to clear constraints: this pathway permits public offerings and sales to retail investors, and the current proposal does not set individual investment limits; however, the total fundraising over a maximum period of four years is capped at $5 million. This limit is not recalculated annually, and issuers and their affiliates cannot initiate new four-year cycles for the same or substantially similar tokens.

Moreover, when accounting for the $5 million, it is not sufficient to consider only the cash received in the bank account. Non-cash consideration related to transactions under this exemption must also be valued according to the rules, and certain token distributions in development, testing, or network incentives may be included as well. Projects that have arranged multiple token distribution methods must evaluate all such arrangements together to determine whether they fall within the limit.

Before using Startup, the issuer must file Form NOR through the SEC’s EDGAR electronic filing system, declaring reliance on this exemption, and must freely provide the required information on its website at the time of or prior to filing. Unlike Fundraising, it does not require prior qualification of the offering prospectus or the associated financial statement requirements, but the following disclosures must still be provided: development plans, team and conflicts of interest, project commitments and progress, token allocation and economic mechanisms, and governance and risks.

These disclosures are tied to subsequent performance obligations. Issuers must certify on Form NOR their intent to complete key management commitments to investors within four years, and thereafter must update information in accordance with regulations and submit a transition report no later than the end of the four-year period. Therefore, at the outset of fundraising, the team must be able to clearly articulate what commitments they are making, who is responsible, how tokens will be allocated, and how progress will be communicated to participants going forward. Statements in the whitepaper, on social media, and in regulatory disclosures must all be consistent.

2. Fundraising: Is registering a U.S. company enough?

If a project seeks larger-scale funding, it must further consider the Fundraising exemption, also known as “funding exemption.” This pathway has two tiers: Tier 1 allows up to $20 million in any twelve-month period, and Tier 2 allows up to $75 million. Projects may apply directly or first use the Startup option and then transition, but both paths must separately meet their respective requirements, and related offerings are subject to aggregation rules, meaning the limits cannot be simply added together.

As the offering limits increase, the issuer eligibility requirements have also become significantly stricter. For fundraising, issuers must be entities established under U.S. law and must satisfy three substantive criteria: a majority of executives or directors must be U.S. citizens or residents, more than 50% of assets must be located in the United States, and the business must be primarily managed in the United States. These requirements apply to both Tier 1 and Tier 2 offerings, meaning that simply registering a U.S. entity while keeping personnel, assets, and operational management entirely abroad does not satisfy the criteria. For projects whose existing entities are located in other jurisdictions, this implies that a comprehensive evaluation of organizational and operational structures may be necessary—not merely completing registration formalities.

Even if the entity meets these conditions, the type of business must also fall within the permitted scope. Entities without a specific business plan or purpose, or those in the development stage planning to merge with or acquire unidentified companies, as well as designated investment companies, business development companies, and others, are not eligible to issue under these provisions. In addition, Startups and Fundraising are also subject to general applicable conditions and disqualification clauses.

After meeting the eligibility requirements, the project may raise funds from the public, including retail investors. However, unlike startups, which impose no individual investment limits, both fundraising tiers require that the purchase amount by individual retail investors not exceed 10% of their higher annual income or net worth; for non-natural persons without accredited investor status, the limit is calculated as 10% of the higher of their income or net worth from the most recently completed full fiscal year. The fact that retail investors may participate does not imply there are no investment limits, nor should this restriction be interpreted as applying only to Tier 2.

Before the official sale, the issuer must also file a Form 1-CRYPTO offering statement with the SEC via EDGAR and obtain qualification from the SEC. Although the rules permit preliminary market testing—known as “testing the waters”—to gauge interest in the project, soliciting interest and accepting actual investments are distinct stages; investment funds cannot be accepted merely because the documents have been filed.

To complete such a filing, both tiers require disclosure of financial condition and submission of financial statements, typically covering the two most recent fiscal years; for entities with a shorter operating history, the applicable shorter period must be provided. One key difference between the two tiers is auditing: Tier 1 does not mandate an audit, but any audit report obtained in accordance with established standards must be submitted, whereas Tier 2 requires an audit. Therefore, when choosing a tier, projects must consider not only the amount of funding needed but also whether their existing financial records can meet the corresponding requirements.

These obligations continue after the fundraising is completed. Both tiers require ongoing submissions of annual, semi-annual, and material event reports. Annual reports are generally due within 120 days after the end of the fiscal year, semi-annual reports within 90 days after the end of the respective period, and designated material events must typically be reported within four business days of occurrence. Since these responsibilities extend beyond the fundraising phase, the project must have someone consistently responsible for maintaining records, managing documentation, and ensuring disclosures—not treating them as a one-time task completed only during fundraising.

3. Exit from Resale and Investment Contract Relationships

After the fundraising, participants will naturally be concerned about how to resell their held assets. Investment contracts issued under both exemptions are not considered "restricted securities" under these federal rules, and neither exemption imposes a uniform lock-up period after purchase. However, specific contract terms and other applicable regulations may still impose restrictions; whether trading is actually possible depends on meeting those conditions, and there is no guarantee that tokens will be listed on exchanges or achieve liquidity.

In addition to reselling after purchase, Fundraising also permits the inclusion of sales by original holders in the offering, but with specific restrictions: in the initial offering and in any subsequent offering qualified within one year of the first qualification, the portion sold by original holders cannot exceed 30% of the total offering amount. Therefore, this 30% limit applies only to the share of sales by original holders in that particular offering—it does not mean that retail investors are restricted to selling only 30% of their tokens in all secondary market transactions. Sales by affiliated holders included in such offerings are subject to additional twelve-month sublimits: $6 million for Tier 1 and $22.5 million for Tier 2, which count toward the respective overall limits.

Regarding how the relationship between the Token and the investment contract should be handled after the originally promised work is completed or halted, RCA has designed a conditional safe harbor. Once the conditions are met—such as the completion or permanent cessation of all originally promised key managerial efforts, no further related commitments being made or intended, and the submission of a transition report—the underlying assets may脱离 the investment contract relationship under this safe harbor. As mentioned earlier, the Startup’s obligation to submit the transition report no later than four years does not automatically mean that these conditions are satisfied upon expiration of the deadline.

Starting from September 2026, under the most favorable circumstances, RCA could be implemented within the next three to six months; even with slight delays, the probability of implementation before the end of the first half of 2027 remains high. Here, "implementation" refers to the rules being in effect and related fundraising channels becoming available.

This prediction is based on policy developments; the SEC has not yet announced such a timeline. However, the formal proposal has entered the public comment phase, and this latest transaction exemption further indicates the SEC’s willingness to act despite congressional obstacles. Together, these factors provide a basis for optimism regarding near-term progress. Of course, after the comment period ends, the final rule must still be adopted, take effect, and be implemented accordingly—how long this will take remains uncertain.

From regular industry engagement and observation, the Chinese Crypto community has paid insufficient attention to and made inadequate preparations for RCA. Many projects have a limited understanding of it, and very few have properly prepared for related fundraising.

Choose Startup if your team needs to clearly organize existing commitments, token allocations, and responsibilities, and ensure you can publicly disclose and continuously update them. Choose Fundraising if you must also consider U.S. entity, personnel, asset, and management requirements, as well as historical financial records, audit capabilities, and ongoing reporting capacity. These preparations involve real business arrangements and day-to-day operations. Lawyers can help you understand regulations and complete filings, but they cannot create genuine management structures or complete financial records out of thin air. Delaying all these issues until “we’ll get a lawyer to handle compliance later” is simply pushing today’s work onto tomorrow.

For investors and ordinary token holders, hearing the words “compliant ICO” does not mean handing over the responsibility of evaluating the project to the SEC. What exemption is it relying on? What commitments have been disclosed? How are the tokens being distributed? How will the raised funds be used? And where can progress be tracked afterward? These factors directly impact the actual risks borne by participants. Even if a project obtains an exemption or completes its filing, it does not mean the SEC guarantees its quality or investment returns. Regulation provides rules for conditional participation, but investors still need to determine exactly what they are paying for.

How RCA will ultimately be adopted still depends on future developments, but research conditions, organizing materials, and identifying gaps can begin now. If the earlier time estimates are largely accurate, there may be only a few months left for preparation.

Regulators have been slow to open up, and projects can criticize the regulation. But if the path has already been opened and you haven’t even taken the time to carefully read the requirements, you may miss a historic opportunity.