Regulatory Risk
Blockchain Association Urges SEC to Rescind Two Regulation NMS Rules
According to reporting by crypto.news, the Blockchain Association urged the U.S. Securities and Exchange Commission to rescind two Regulation NMS provisions, which remains not officially confirmed by an official or first-party source.
Advocacy for Regulatory Modernization
According to reporting published by crypto.news, the Washington-based industry group Blockchain Association formally urged the United States Securities and Exchange Commission to rescind two specific provisions under Regulation NMS. The organization argued that regulatory frameworks originally formulated for conventional stock exchanges in 2005 could severely restrict modern tokenized securities markets that utilize continuous and automated blockchain settlement mechanisms. The group submitted its comment letter supporting the elimination of Rules 611 and 610(e) following an administrative proposal issued by the Commission earlier under file number S7-2026-20. The proposal has attracted significant attention from various market stakeholders seeking clarity on digital asset integration.
The reported submission emphasizes that trading infrastructure has evolved substantially toward faster, more interconnected digital systems since the inception of the original rules. While traditional equity markets rely heavily on fragmented order books where displayed prices serve as the primary indicator of execution quality, blockchain venues frequently integrate execution, ownership recording, and settlement into a unified process. Consequently, the industry association contends that maintaining legacy restrictions without accounting for technological advancements creates unnecessary compliance barriers for innovative financial products and digital asset enterprises operating across multiple regulated jurisdictions.
Analysis of Specific Rules in Question
Rule 611, widely recognized as the Order Protection Rule, was originally adopted to connect fragmented national equity markets and prevent trading venues from executing transactions at prices inferior to protected quotations displayed across other registered systems. The provision requires trading centers to implement robust administrative policies designed to prevent prohibited trade-throughs, subject to specific regulatory exceptions. The Blockchain Association noted that this rigid focus on displayed price fails to acknowledge alternative execution metrics that matter deeply in digital asset transactions, such as settlement speed, overall transaction fees, counterparty exposure reduction, and enhanced liquidity availability.
In parallel, Rule 610(e) addresses locked and crossed markets, which occur when a prevailing bid equals or exceeds an available offer across national networks. The regulation mandates that national securities exchanges maintain rules designed to prevent members from displaying such overlapping quotations. According to media reporting, the association believes these specific operational constraints impede the efficient functioning of decentralized and tokenized alternative trading platforms. Critics of the existing framework argue that automated onchain systems can achieve superior overall outcomes for investors even when initial displayed prices differ slightly from conventional venues.
Broader Market Implications and Commissioner Views
The broader administrative proposal covers national market system stocks generally rather than being restricted exclusively to blockchain-based financial products. If finalized, the rescission would affect conventional exchanges, alternative trading platforms, registered brokers, and market makers across the entire financial ecosystem. Proponents of the changes suggest that simplifying market structure can reduce operational costs and foster greater competition among execution venues. However, public commenters and regulatory officials have raised valid concerns regarding potential downsides, including the risk that retail investors might receive execution prices inferior to transparent market quotations.
SEC Commissioner Mark Uyeda remarked that eliminating these foundational provisions would inevitably raise complex questions concerning overall best execution duties, market transparency, trading mechanics, and investor confidence. He characterized the ongoing initiative as the initial phase of a comprehensive market structure review rather than a definitive conclusion. Furthermore, various public participants warned that removing Rule 611 could inadvertently increase conflicts of interest related to order routing practices if brokers rely too heavily on subjective internal assessments rather than objective, publicly displayed benchmark prices.
Current Regulatory Status and Tokenized Assets
Despite active industry lobbying, tokenized securities remain fully subject to existing federal securities laws, and regulatory officials have repeatedly emphasized that recording an ownership interest on a distributed ledger does not alter its legal classification. U.S. tokenization projects continue to expand within established compliance structures. Industry initiatives such as Ondo Finance positioning specific tokenized funds on public networks, alongside Kraken-backed xStocks launching onchain engines for numerous equities, demonstrate the growing overlap between digital ledgers and traditional market architecture.
The formal comment deadline for the Commission's proposal closed following publication in the Federal Register. Regulatory staff are currently tasked with reviewing all submitted feedback before determining whether to recommend a final rule, modify the existing text, or abandon the rescission entirely. Any subsequent action would require an additional formal vote by the Commission and subsequent publication. Meanwhile, industry participants continue monitoring parallel developments, including Financial Industry Regulatory Authority guidance updates regarding best execution standards in modern trading environments.
Conclusion and Next Steps for Market Participants
In conclusion, the reported push by the Blockchain Association to repeal Regulation NMS Rules 611 and 610(e) highlights ongoing tensions between traditional equity market structures and emerging automated blockchain settlement systems. This development affects tokenized securities issuers, digital asset trading venues, and retail user groups navigating evolving regulatory expectations. It remains unconfirmed whether the U.S. Securities and Exchange Commission will ultimately adopt the proposed rescission or modify its approach following public commentary.
As the next action, affected entities and user groups must monitor formal regulatory updates from the Commission and review their internal compliance frameworks for executing digital asset transactions. Stakeholders should participate in ongoing industry discussions, track related guidance from regulatory bodies like FINRA, and prepare for potential structural adjustments to market routing and execution obligations once official determinations are finalized.
Cexvia conclusion
Regulatory Outlook and Next Steps
According to crypto.news, the Blockchain Association submitted a comment letter supporting the repeal of Regulation NMS Rules 611 and 610(e), affecting tokenized securities markets and market participants, which is not officially confirmed.
- Risk meaning
- The advocacy highlights potential frictions between legacy equity market regulations and automated blockchain settlement systems, raising compliance questions for digital asset trading platforms operating within the jurisdiction.
- User action
- Market participants and tokenized asset issuers should monitor regulatory developments regarding Regulation NMS and evaluate their compliance frameworks in anticipation of potential structural changes.
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