The SEC's proposed elimination of Rule 611 would open significant pathways for tokenized US equities to trade on decentralized exchanges, according to Galaxy Digital's Alex Thorn.
Rule 611, formally known as the "Order Protection Rule," requires market participants to route orders to venues offering the best execution prices. The regulation essentially mandates order flow toward centralized, regulated exchanges. Scrapping it removes a structural friction point that has prevented tokenized stocks from competing fairly on blockchain platforms.
Thorn framed the development as a regulatory win for the emerging tokenized equities sector. Without Rule 611, decentralized platforms could attract meaningful trading volume in tokenized versions of major US stocks without violating securities laws. This matters because tokenized equities represent one of crypto's most credible institutional bridges. Companies like Openledger, Polymesh, and Stellar-backed initiatives have built infrastructure for on-chain stock tokens, but liquidity has remained thin partly due to regulatory obstacles like Rule 611.
The rule removal addresses a fundamental asymmetry. Centralized brokerages operate under Rule 611's mandate, but blockchain venues offering better prices or tighter spreads couldn't compete effectively since order routing rules funneled volume away from them. Token-wrapped stocks could theoretically offer 24/7 trading, fractional ownership, and faster settlement on chains like Ethereum or Polygon. Yet without fixing Rule 611, these advantages remained theoretical.
Galaxy's assessment carries weight in institutional circles. The firm has long advocated for regulatory clarity on tokenized assets, and Thorn's analysis suggests the SEC's proposed rule change aligns with broader deregulatory sentiment in crypto policy. The Biden administration's final months saw increased openness to crypto innovation before the incoming Trump administration, which campaigned on a pro-crypto platform.
Tokenized stocks still face multiple regulatory hurdles. The SEC maintains that most crypto tokens constitute unregistered securities. Rule 611's removal alone doesn't solve that problem. However, it eliminates one specific barrier that would have prevented compliant tokenized equity platforms from functioning efficiently once the underlying legal framework settles.
The timing matters. Several blockchain projects have prepared tokenized stock infrastructure but held back from major launches due to Rule 611 concerns. Its elimination could trigger immediate platform launches and potentially meaningful trading volumes in on-chain equities. Early movers in tokenized real-world assets like Lido Finance and MakerDAO demonstrate institutional appetite for blockchain-native financial products.