Legislation in Congress is temporarily stalled, but the SEC has no intention of standing still.

Written by: Meng Yan

The U.S. Securities and Exchange Commission (SEC) recently announced an exemption for tokenized stock trading. This is certainly a piece of news worth noting for teams building exchanges, especially RWA trading platforms. However, being in this track and being able to use this exemption may be much further apart than one might imagine. Do existing trading systems and RWA businesses automatically qualify?

For the Chinese crypto community, the most significant implication of this move may not be how many teams can directly participate, but rather what it indicates about the SEC's attitude: legislation in Congress may be stalled, but the SEC is not planning to wait idly. This signal also makes the ongoing public fundraising rules more worth watching: can these rules accelerate implementation, and what changes will they bring to projects and ordinary investors?

1. TSV Has Nothing to Do with You

TSV stands for Tokenized Securities Venue. The SEC's order issued on September 17, 2026, provides a temporary exemption from the "exchange" definition in the Securities Exchange Act of 1934 for qualifying venues, while also offering an exemption from the "dealer" definition for certain liquidity providers, valid for five years. It allows approved participants to trade tokenized stocks of the U.S. national market system (NMS) via automated market makers (AMM) and liquidity pools, known as Tokenized NMS Stock.

This does indeed open a door for trading platforms but does not grant a 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 thresholds will not disappear.

First, what exactly are you trading? The core assets for TSV are tokenized NMS stocks that meet the definition, rather than all assets tagged with RWA. Products like real estate shares and private credit cannot just claim exemption simply because "real assets are on-chain"; even if related to U.S. stocks, tokens issued by third parties that only provide synthetic exposure to share prices do not fall under the Tokenized NMS Stock definition here. Holders must obtain the same rights as those associated with traditional stocks, including dividends, voting, and residual asset rights upon liquidation. There is a difference between being able to align token prices with U.S. stock movements and fully implementing shareholder rights. Platforms must also verify these rights and cannot just rely on claims of "asset-backed."

Second, having tokens does not mean you can list them as you please. If the stock is tokenized by a third party unrelated to the underlying issuer, the venue must notify the underlying issuer in writing in advance and must wait at least thirty calendar days after the notice is received; if the issuer raises objections within the specified period, the tokenized stock cannot be listed for trading at that venue. For platforms looking to quickly expand their offerings, this means that product design, rights verification, and communication with the underlying issuer must all be conducted, leaving behind the idea of just selecting a popular asset, tokenizing it, and going live.

Third, existing trading systems may not be the systems supported by this exemption. TSV must use AMM liquidity pools to provide trading for permitted participants and set access standards; relevant smart contracts must be publicly available and auditable, deployed on a public and permissionless distributed ledger. While public chains can be permissionless, trading entry is not open to anyone who connects their wallet. Platforms must clarify the procedures for allowing participants and wallets to access, screening methods, and relevant sanctions compliance arrangements. Therefore, existing order-book trading systems cannot directly replace the AMM model here, and an open pool that does not set participant access restrictions cannot be simply replicated.

Fourth, U.S. entities are just the beginning; ongoing regulatory compliance is the subsequent work. TSV must belong to the U.S. person as defined in the order; entities established under U.S. law are one scenario, so overseas teams can explore meeting this requirement through U.S. entities, but having an overseas entity does not automatically mean compliance. More importantly, platforms must comply with applicable U.S. sanctions requirements, maintain transaction and compliance records in the U.S., retain these records for three years during and after the exemption period, and allow SEC personnel to inspect them at any time. If relevant entities or personnel are subject to disqualification conditions, they must also meet the exception licensing conditions specified in the order to rely on the exemption. Registration formalities can be arranged, but the capability to maintain records, screening, and ongoing regulatory responses must be established in actual operations.

Fifth, being exempt from exchange registration does not mean being exempt from daily compliance. At least thirty calendar days prior to starting operations, the platform must publish a specified public notice on its website and notify the SEC in writing within one business day of publication, continuing to provide updates as required. Data from transactions in the last thirty days must be publicly disclosed in a machine-readable format, priced in U.S. dollars, and updated within ten minutes of each transaction occurring; if the underlying stock is suspended on a primary listing exchange, the corresponding tokenized stock must also be suspended simultaneously. Venues are also prohibited from providing credit to participants for purchasing these types of stocks, or borrowing, pledging, and arranging the pledge of securities and non-securities crypto assets within the venue.

If liquidity providers rely on separate dealer exemptions, their related securities activities must be limited to trades within the TSV pool and be executed on their own accounts, without holding or managing client assets. If a team wants to integrate trading, leverage, client assets, and market-making under this exemption, they must re-examine their business arrangements.

Sixth, even crossing the threshold does not mean planning for unlimited platform expansion. The order sets two limits based on existing U.S. market volatility control plans: the first tier allows a maximum of seventy-five trading codes, with a maximum trading volume proportion for each security capped at 0.25%; the second tier allows a maximum of two hundred fifty codes, with a proportion cap of 2.5%. This proportion compares the average daily trading volume of the corresponding tokenized stocks within the venue to the market's average daily trading volume for the underlying stocks over the past month, and the trading volume and code count related to TSV must be combined for calculations. These are caps on scale, not minimum capital thresholds, but they will constrain the business capacity of the platform. Trying to set up a few related platforms to bypass the restrictions will not work either.

Looking at these requirements together, the challenges are clear: teams need to simultaneously address securities rights, communication with underlying issuers, AMM and participant access, recordkeeping and operations under U.S. regulations, and business arrangements under limited scales. Having a trading platform, or even already working with RWA, does not equate to possessing these capabilities.

Based on the understanding of the industry's actual preparedness, it is judged that most overseas Chinese entrepreneurial teams currently find it difficult to directly place their existing platforms into this framework; if they genuinely want to participate, they often need to adjust their asset structures, trading systems, and compliance operations. The difficulty arises from the distance between these specific conditions and existing business, rather than from the founders' Chinese identity. The saying "TSV has nothing to do with you" is aimed precisely at those who expect a limited exemption to translate directly into business benefits.

However, not being able to use it directly does not mean one can ignore it. The policy signal of TSV may be even more important than how many platforms it directly benefits.

2. CLARITY Did Not Pass, but the SEC Took Action

Just two days before this order was issued, on September 15, the U.S. Senate failed to advance a procedural vote for the CLARITY Act. SEC Chairman Paul Atkins subsequently mentioned the failure to advance CLARITY in a statement introducing this exemption and stated that the SEC would continue to act using its existing statutory powers.

Understanding the obstruction of the CLARITY Act as a halt in overall Crypto regulatory reform clearly does not explain the current action. Congress has its legislative process, and the SEC has the authority granted by existing laws; the former may be temporarily stalled, but this does not mean the latter can only wait. The significance of TSV lies in the SEC translating this attitude into practical action.

Thus, waiting for "CLARITY to pass before proceeding" in relation to other ongoing rules may not be a matter of caution, but could be a muddling of two processes. Among these, the most noteworthy is the public fundraising proposal that has already entered the comment phase. It directly addresses how crypto projects issue and raise funds, with implications for projects and ordinary participants that are broader than a stock trading arrangement.

3. "Compliant ICO" Has a Path, Is Your Project Qualified?

RCA stands for Regulation Crypto Assets, which can be translated as "Crypto Asset Regulatory Rules." This is a rule proposal put forward by the SEC in August 2026 and is currently in the comment phase, with the deadline for comments set for October 20. It has not yet taken effect, but has already proposed two types of securities registration exemptions, attempting to provide a path for crypto projects to raise funds through Token offerings under certain conditions.

The need for such arrangements arises because whether a Token itself is a security is not the same question as whether the fundraising surrounding it is subject to securities law. For instance, if a team sells Tokens while promising to develop a network and build products, and investors contribute funds based on the expected benefits from these efforts, then even if the Token itself is not a security, the entire fundraising arrangement could still constitute an "investment contract." The two types of registration exemptions in RCA target arrangements that fit the definitions: the underlying Token itself is not a security, and the contract does not involve any assets other than that Token. Issuers relying on these exemptions must still fulfill corresponding disclosure obligations and continue to bear responsibilities related to fraud.

For the community, the most meaningful aspect of these two exemptions is that they both allow participation from ordinary investors, i.e., investors who do not qualify as accredited investors under U.S. securities laws. As a result, projects can raise funds from the public through Token issuance, provided they meet certain conditions, without having to limit participation to institutions and high-net-worth individuals. In this sense, RCA provides a conditional path for "compliant ICOs."

If this path can be implemented, users of the product will have the opportunity to provide funding for early project development while bearing investment risks; teams obtaining this funding will also have to disclose information to participants and continuously explain what they are doing. If projects have the chance to receive money from ordinary users, they must clarify corresponding commitments and responsibilities.

The allowance for public participation does not equate to your project being qualified to raise funds from the public. The two types of exemptions are distinctly different in terms of subjects, limits, and performance obligations, and these differences will directly determine whether a project can actually use them and how much preparation is necessary.

The subject requirements here must first be distinguished from the geographic scope of investors. Currently, neither type of rule restricts investors solely to U.S. citizens or residents nor excludes foreign individuals and entities as a category; the stricter U.S. connection requirements outlined below constrain the issuers of Fundraising. Foreign participants thus need to understand these rules, but during actual issuance or investment, they must still comply with the applicable regulations of the relevant jurisdictions, as RCA addresses U.S. securities registration obligations but does not substitute for the laws of other places.

1. Startup: Small Scale Initiation, Broader Subject Requirements

Startup exemption can be translated as "Startup Exemption." According to the current proposal, issuers utilizing this path can be entities, individuals, or teams consisting of individuals or entities, without necessarily needing to establish a company first, and there are no requirements for the U.S. registration, personnel, assets, and primary management location as outlined in Fundraising. Therefore, a project without a U.S. company still has the necessity to examine the potential applicability of Startup. Of course, if declaring as a collective team, each member must sign the declaration and certification according to the regulations and assume corresponding responsibilities.

With relatively broad scope for subjects, the fundraising scale is subject to more explicit constraints: this path allows public fundraising, selling to ordinary investors, and the current proposal does not set a personal investment ceiling, but within the longest four years can only raise a total of $5 million. This limit is not re-calculated annually, and issuers and their affiliates cannot repeatedly initiate new four-year cycles surrounding the same or substantially similar Tokens.

Moreover, when calculating this $5 million, one cannot simply look at how much cash is received in the bank account. Transactions conducted under this exemption must value non-cash consideration per the rules, and certain Token distributions within development, testing, or network incentives might also be included. For projects that have arranged various Token distribution methods, determining whether they are within this limit requires sorting through these arrangements.

Before starting to use Startup, issuers must submit Form NOR through the SEC's electronic filing system EDGAR, declaring reliance on this exemption, and by that submission or prior to that, provide the required information freely on their website. It does not require obtaining qualification recognition for a prospectus like Fundraising does, nor does it have the latter's financial statement requirements, but the project situation that must be disclosed still needs to outline: including development plans, team and conflicts of interest, project commitments and progress, Token distributions and economic mechanisms, as well as governance and risks.

These disclosures are also linked to subsequent performance responsibilities. In Form NOR, the issuer must certify the intent to complete key management work promised to investors within four years, and thereafter must update information as per rules, submitting a transition report no later than the end of the four-year period. Consequently, teams at the start of fundraising must be able to articulate what they commit to, who is responsible, how Tokens will be distributed, and how they will convey progress to participants. Statements in white papers, social media, and disclosures cannot diverge.

2. Fundraising: Is Registering a U.S. Company Enough?

If a project wishes to obtain a larger scale of funding, it needs to consider the Fundraising exemption, i.e., "Fundraising Exemption." This path internally divides into two tiers: Tier 1 allows a maximum of $20 million within any twelve months, while Tier 2 allows a maximum of $75 million. Projects can apply directly or first use Startup and then transition, but both paths must satisfy their respective conditions, and related issuances must also comply with the combined calculation rules, not allowing simply stacking limits.

With the increase in limits, the subject requirements for issuers also rise significantly. Fundraising requires that issuers must be entities established under U.S. law and simultaneously satisfy three substantial conditions: a majority of the executives or directors must be U.S. citizens or residents, more than 50% of the assets must be located in the U.S., and the business must mainly be managed in the U.S. These conditions apply to both Tier 1 and Tier 2, so merely registering a U.S. entity while keeping personnel, assets, and actual management elsewhere does not suffice. For projects with existing entities based in other jurisdictions, this implies that what needs assessment could be organizational and business arrangements, not just processing registration formalities.

Even if the entity meets these conditions, it still needs to check if its business type falls within the permitted scope. Companies without specific business plans or purposes, or developmental stage companies intending to merge or acquire undetermined companies, as well as specified investment companies, business development companies, etc., cannot issue based on this. Furthermore, both Startup and Fundraising are subject to general applicable conditions and specified disqualification clauses.

Once qualified for issuance, projects can raise funds from the public, which includes ordinary investors. However, unlike Startup, where there is no individual investment cap, both tiers of Fundraising limit the purchase amount for ordinary natural persons to no more than 10% of the higher value of their annual income or net worth; for non-natural persons that do not qualify as accredited investors, it is calculated at 10% of the higher value of the most recently completed fiscal year’s income or net worth. Ordinary investors can participate, but this does not mean that there are no limits on participation amounts, and this restriction should not be understood as applicable only to Tier 2.

Before formal sales begin, issuers must also submit Form 1-CRYPTO prospectus through EDGAR and obtain SEC qualification recognition. While the rules allow for conditional pre-funding inquiries, i.e., testing the waters to gauge market interest in the project, gauging interest and official fundraising are different stages, and investment funds cannot be accepted simply because the documents have been submitted.

To complete such filings, both tiers require disclosures of financial conditions and provision of financial statements, usually involving the first two fiscal years; those established for a shorter period provide information for the applicable shorter duration. A distinction between the two tiers lies in the audit: Tier 1 does not mandate audits, but submitted audit reports that meet the criteria must be submitted, while Tier 2 requires audits. Consequently, projects need to consider not only how much funding they need when choosing which tier but also whether their existing financial data can support the corresponding requirements.

These responsibilities continue after fundraising is completed. Both tiers require the submission of annual, semi-annual, and specified significant event reports, with annual reports generally needing to be submitted within 120 days after the fiscal year ends and semi-annual reports within 90 days after the respective period ends; designated significant events generally need to be reported within four business days after they occur. Since these obligations extend into post-funding, projects need someone responsible for continued maintenance of accounts, information, and disclosures, and cannot treat them as merely temporary procedures to complete during fundraising.

3. Exiting through Resale and Investment Contract Relationships

After fundraising, participants will naturally care about how to resell the assets they hold. Investment contracts issued under these two exemptions do not fall under the "restricted securities" of federal rules, and this exemption does not contain a unified period that must be locked post-purchase. However, specific contracts and other applicable rules may still impose restrictions, and actual tradability depends on corresponding conditions and does not guarantee that tokens can appear on exchanges or achieve liquidity.

In addition to resale after purchase, Fundraising also allows the original holders' sales to be included in the issuance, but it has specific restrictions: in the initial issuance, as well as in a follow-up issuance recognized within one year after initial qualification, the portion sold by original holders cannot exceed 30% of the total issuance price. Therefore, this 30% constraint refers to the original holders’ share of the sale in that issuance, and it does not mean that ordinary investors can only sell 30% of their tokens in all secondary market transactions. Related holders’ sales included in such issuances also have a child cap of twelve months, separately set at $6 million for Tier 1 and $22.5 million for Tier 2, and these amounts are counted into the corresponding total limit.

As for how to handle the relationship between Tokens and investment contracts after the promised work has been completed or halted, RCA has designed conditional safe harbors. After fulfilling or permanently ceasing the completion of all key management efforts originally promised, no new related commitments are made or intended, and conditions such as submitting transition reports are met, the underlying assets can break free from this investment contract relationship based on this safe harbor. The aforementioned Startup must submit a transition report within four years at the latest, does not automatically mean that the conditions are satisfied once the deadline is reached.

4. Optimistic Prediction: Implementation in Three to Six Months

Starting from September 2026, in the most favorable circumstances, RCA could be implemented within the next three to six months; even if slightly delayed, the probability of implementation before the end of the first half of 2027 remains high. This implementation refers to the rules taking effect and relevant fundraising channels becoming available.

This prediction is based on policy progress, as the SEC has not provided such a timetable. However, the formal proposal has entered the comment phase, and this trading exemption demonstrates that the SEC is willing to act despite Congress's obstacles, creating grounds for optimism about recent developments. Of course, after the comment period ends, the final rules will also need to be adopted, take effect, and undergo corresponding implementation arrangements, making the exact timeline uncertain.

5. Waiting for Rules to Take Effect, Then Seeking Last-Minute Help?

From regular industry contacts and observations, the attention and preparation among the Chinese crypto community for RCA are far from sufficient. Many projects have limited understanding of it, and very few projects are properly preparing for related fundraising.

Choosing Startup, teams need to clearly sort their existing commitments, Token distributions, and responsibilities, confirming they can publicly articulate and continuously update; choosing Fundraising, they must also consider U.S. entity, personnel, assets, and management conditions, as well as historical accounts, auditing, and ongoing reporting capabilities. These preparations involve real business arrangements and daily work. Lawyers can help understand the rules and complete filings, but they cannot conjure genuine management arrangements and complete accounts for a project out of thin air. Leaving all issues to "afterwards, consult a lawyer for compliance" merely pushes today's work into tomorrow.

For investors and ordinary token holders, hearing the words "compliant ICO" does not mean handing over the responsibility for judging the project to the SEC. What exemption they plan to rely on, what commitments have been publicly disclosed, how Tokens are distributed, how the raised funds will be used, and where progress can be seen afterwards all relate to the actual risks borne by participants. Even if a project obtains a certain exemption or completes a filing, it does not mean the SEC guarantees its quality and investment returns. Regulation provides conditional participation rules; investors still need to judge what they are actually paying for.

How RCA will ultimately be adopted still depends on subsequent progress, but researching conditions, organizing materials, and identifying gaps can begin now. If the earlier time assessment holds approximately true, the time left for preparation may only be a few months.

If regulatory access remains closed, projects can criticize regulation. But if the pathway has opened and one has not even seriously read the conditions, then one may miss a historic opportunity.