Author: Thaddeus Pinakiewicz

Translation: TechFlow

TechFlow Overview: For U.S. stocks to transition to true 24/7 trading, the bottleneck lies not only in trading hours but also in how transfer agents keep their records. The SEC proposed a substantial update to transfer agent rules this week, explicitly allowing blockchain record-keeping and raising the sensitive issue of whether "wallet addresses can replace names and addresses"—which directly relates to whether tokenized stocks can circulate more like bearer assets.

The U.S. Securities and Exchange Commission (SEC) has taken a significant step toward modernizing the transactional and settlement “pipeline” of the American financial system. This week, the commission proposed a comprehensive update to the rules governing transfer agents—entities responsible for maintaining official ownership records of issuers, processing transfers, and ensuring that one share held by Alice does not accidentally become two shares under Bob's name. Most related rules have hardly been revised since the late 1970s and early 1980s, when physical certificates and manual processing were still the default options, and "digital assets" were almost meaningless. Meanwhile, the SEC is also preparing for a roundtable on 24-hour trading on September 17, covering topics such as exchange and broker readiness, overnight monitoring, closing price mechanisms, clearing and settlement, anticipated liquidity, cybersecurity, personnel allocation, market continuity, and the path from extended trading hours to a true 24/7 market. These two matters sound like two separate tracks (updating transfer agent rules on one side and discussing trading hours on the other), but they lead to the same destination: how long the market can trade continuously is determined by how long ownership records and the clearing, settlement, and compliance tracks can support it. The related puzzle pieces are already in motion:

On June 26, the SEC approved the expansion of the operating hours for comprehensive stock market data sources: from 9 PM on Sunday to 8 PM on Friday, with a one-hour technical pause each weekday night.

On June 29, DTCC’s NSCC launched 24×5 clearing, operating from Sunday night to Friday night.

On August 5, the SEC approved temporary overnight price fluctuation limits. Unlike daytime limit up-limit down measures, hitting overnight fluctuation limits will not automatically trigger trading halts.

On December 6, FINRA's Trade Reporting Facilities plan to extend their hours to match the broader overnight market push.

In a sense, the market is already close to 24/7—provided you know the right people or have brokers willing to take overnight orders (which, of course, are charged). Investors can access alternative trading systems (ATS) and broker platforms, but the nationwide market infrastructure that makes regular-hour quotes and trades "readable" has yet to function around the clock. The result is a patchwork rather than a unified market.

You might ask: why isn't it happening yet? Ask someone at a bank or fund what happens after the closing bell, and you'll likely hear a lot of complaints. Unless everything happens internally within the same platform, or you have the top infrastructure that money can buy—even then, end-of-day processes still take time. Positions, cash, failed deliveries, and corporate actions all need reconciliation among institutions. One person's ledger records one thing, while another person's records something else, and several people spend the night figuring out who holds what and where the human errors occurred. Most of this is a residue of decades of inefficiencies layered upon the evolution of the financial ecosystem: different ledgers, different forms of securities, different custodians, different clearing systems, and a system where "everyone holds their own truth, and each night there’s a séance to see if the truths align."

Blockchain and common standards have proven for over a decade how far shared state and programmable settlement can push this issue. Even traditional giants are proving this point. JPMorgan indicated that its Kinexys currently handles around $7 billion daily, having cumulatively processed over $40 trillion since launch. It is largely private and permissioned, to be sure, but it is still a shared, programmable ledger functioning at an institutional scale.

The key is not the ideological purity of "using blockchain," but rather enhancing the overall efficiency of the financial system through common standards and platforms. The proposed changes to transfer agent rules will explicitly recognize that blockchain and distributed ledger technology are permissible accounting mediums. Fairly speaking, they may not have been explicitly prohibited before. Current rules are technically neutral, allowing transfer agents to properly assert—and with some guidance from SEC staff backing them up—that on-chain records have satisfied their obligations.

Galaxy and our on-chain transfer agent Superstate have done this on Solana for GLXY stock. Superstate, as a registered transfer agent, records legal ownership on-chain in real-time. These shares are still limited to verified investors and whitelisted wallets, so they are not yet stocks that can freely circulate in the entire DeFi, but they prove the underlying model is already feasible.

The SEC's proposal will shorten the distance between "our lawyers think this is allowed" and "the rule text explicitly allows this." After all, lawyers are a very expensive consensus mechanism. Consensus, rollback, and fork risks will not disappear; they will become operational risks that transfer agents must control and keep records of, rather than reasons to refuse using blockchain. The most interesting part comes from Commissioner Hester Peirce, who has focused on the most "heretical" question in the proposal (from a regulatory perspective):

"Should transfer agents still be required to collect the names and actual addresses of security holders, or should the rules allow the collection of other identifiers, such as email addresses and digital wallet addresses?"

This will surely spark one of the most ironic email chains in history that AML/KYC purists were cc’d on, but it is indeed a fascinating question.

Advocates for personal privacy would welcome this change, but under our current patchwork of securities laws, it raises a host of issues.

Can tokenized stocks be bearer assets? The analogy with bearer bonds is not perfect but useful. For genuine bearer instruments, possession is everything (just ask Hans Gruber what he was looking for in Nakatomi Plaza). The U.S. Congress effectively "nuked" domestic bearer issuance using tax means decades ago, rather than pretending that metaphysical concepts made it impossible and declaring it illegal outright. Not all tokenized stocks are, or should be, bearer instruments. But for those designed to circulate in a quasi-bearer fashion, publicly accessible wallet addresses, in strict terms, hold more information than what issuers would retain under a true bearer model: they are persistent, observable, and auditable. This does not mean knowing the person behind it, but it is certainly not "zero information."

Next comes a series of fun follow-up questions. What happens when a wallet—or 20 wallets controlled by the same person—crosses the 5% beneficial ownership threshold? Wallet addresses won't report Schedule 13D or 13G; the person controlling them will. Crossing 10% will trigger Section 16 reporting requirements. Theoretically, the identity of ordinary shareholding levels can remain private; disclosure only occurs when legal thresholds are met, but someone must be able to aggregate mutually controlled addresses in a defensible manner.

So what exactly is "control"? Private keys? Multi-signature signers? Smart contracts? Accounts held in custody? DAO voting? Wallets managed by consultants that are economically owned by the client? These questions have long been tricky for DAO designers and governance token architects: how to distinguish aligned voters from clusters of wallets controlled by a single entity when explicit ownership lines are absent? Pushing the question to its logical extremes can reveal points of clear regulatory fracture from others.

There are even larger questions. If wallet addresses can be registered owners and transfer agents' ownership records only need addresses, could issuer-sponsored tokenized shares ultimately leave the closed whitelist system and circulate freely on public networks—much like xStocks and other SPV stock wrappers (e.g., Robinhood’s Euro stocks)?

The SEC has made it clear: putting securities on the blockchain does not change the applicability of securities laws. Beneficial ownership reporting, transfer restrictions, sanctions controls, and the broader BSA/KYC stack surrounding brokers, custodians, and regulated financial institutions will not evaporate simply because certificates have become tokens. On the other hand, the proposal itself also asks: does the requirement for full names and actual addresses create unnecessary unauthorized disclosure risks? There is a vast policy chasm between "blockchain can maintain ownership records" and "any anonymous wallet can freely receive that security." Even so, changing the transfer agent rules still matters: it may reduce the amount of personally identifiable information that has stopped at centralized, hackable databases.

Automated, standardized settlement systems built on blockchain and open protocols are becoming increasingly persuasive. For those who don't care about settlement and think that 24-hour markets are only useful for "gamblers," one can read studies about overnight returns versus daytime statistical differences. Important information arrives when major exchanges shut down, and overnight price changes are largely driven by this information (the SEC's August documents on overnight price fluctuation also explicitly mention this). Closed exchanges do not create information silence; they create a divide between investors able to access OTC or alternative places and those who cannot.

This proposal lays the groundwork for the "sober version" that DeFi has been trying to realize for years. Bringing more investors closer to around-the-clock, ultimately 24/7 trading should compress the rents brokers charge for "finding" overnight liquidity, commodifying more basic financial functions. It will not eliminate intermediaries, but it can force them to compete on service and cost rather than relying solely on access qualifications.

Information flow does not stop when the market closes. As it stands, the only thing closed markets achieve is allowing privileged institutions to touch OTC. Regulation is finally catching up. Forward, upward. — Thad Pinakiewicz