The U.S. Securities and Exchange Commission is expected to postpone its proposed “innovation exemption” for tokenized securities once again, as concerns from the White House and Wall Street reportedly complicate the initiative.

Three industry sources familiar with the discussions said the SEC had been preparing to release at least part of the exemption alongside Friday’s meeting on its separate “Reg Crypto” proposal. The agency canceled that meeting late Thursday.

The exemption could have been announced as early as Friday and was intended to ease regulatory barriers for companies seeking to issue and trade tokenized securities on blockchain networks under existing securities laws.

Friday’s meeting was scheduled to address “Reg Crypto,” a separate SEC initiative designed to establish rules for crypto projects raising capital through token offerings. Officials were also expected to provide details on the innovation exemption, although it was not expected to immediately go through the formal notice-and-comment process.

One source familiar with the matter said the White House was concerned that the proposal could “kick a hornet’s nest” while Congress negotiates the Digital Asset Market Clarity Act. Advancing the exemption now could potentially complicate efforts to secure agreement on broader crypto legislation.

SEC staff are also reportedly scrutinizing whether the agency has sufficient legal authority to offer such broad regulatory relief. Questions include whether the SEC has carried out enough economic analysis and followed the required procedures. Industry participants have reportedly been told that the exemption could remain delayed until lawmakers make progress on the Clarity Act.

Wall Street Raises Concerns

The SEC’s tokenization plan has also faced opposition from traditional financial institutions.

SIFMA, which represents major broker-dealers and investment banks, has reportedly emerged as one of the main groups challenging the initiative.

A key concern involves how blockchain-based trading venues would operate under existing equity-market regulations, particularly brokers’ obligation to obtain the best possible execution for customers.

Under Regulation NMS, prices are linked across traditional exchanges and brokers generally must execute trades at the best protected quote. Applying those requirements to decentralized exchanges or automated market makers could be more complicated because pricing and execution costs may differ from those on traditional exchanges.

In June, the SEC proposed eliminating Rule 611 of Regulation NMS, known as the Order Protection Rule. The move was widely viewed as an attempt to remove a significant obstacle to tokenized securities trading.

SIFMA has argued that major changes to market structure should be introduced through formal rulemaking rather than exemptions or no-action relief.

In a June 30 letter to the SEC, the group called for significant structural changes to go through an open and transparent process that allows industry participants and the public to submit comments.

The SEC did not immediately respond to questions about the timing of the proposed exemption.

Innovation Exemption Has Faced Earlier Delays

The latest setback follows an earlier effort to release the exemption in May after the SEC repeatedly pushed back its self-imposed deadline.

At the time, the proposal was believed to potentially allow security-token issuers to offer digital assets without maintaining control over the underlying securities. That possibility raised concerns among traditional securities issuers about the creation of synthetic versions of existing assets.

The SEC ultimately decided not to release the proposal. Commissioner Hester Peirce later said she did not expect synthetic securities to be covered by the exemption. Instead, she suggested the framework would likely support tokens representing digital versions of the same underlying equities that investors can already buy.

Tokenization Continues to Gain Momentum

The delay comes as tokenization attracts growing interest across the financial sector. Wall Street firms are increasingly exploring blockchain technology for issuing and trading stocks, bonds and investment funds.

Nasdaq and the New York Stock Exchange have announced plans to develop infrastructure for tokenized securities. Meanwhile, the Depository Trust & Clearing Corporation recently completed its first live production transactions involving tokenized securities as part of a testing program.

The potential market is considerable. Citi analysts estimate that tokenized assets could reach $5.5 trillion by 2030.

Under Chairman Paul Atkins, the SEC has increasingly portrayed tokenization as a way to modernize financial markets. However, regulators and financial institutions continue to debate how traditional assets should move onto blockchain networks and how tokenized trading platforms can fit within existing U.S. securities and market-structure rules.