Tokenization-related stocks slid Friday after another delay to a long-awaited U.S. regulatory initiative weighed on investor sentiment towards the industry's expansion into traditional securities.

Bullish (BLSH) fell about 8% in early trading, reversing gains following its second-quarter earnings report. The crypto platform, which owns CoinDesk, is acquiring transfer agent Equiniti as it builds infrastructure for issuing and servicing tokenized securities. Blockchain-based lender Figure (FIGR) also gave back its post-earnings advance, falling about 9% from Thursday's session high.

Crypto ( CRCW ) exchange Coinbase (COIN), which is pursuing its own tokenized-stock offering and recently picked Abu Dhabi as the offshore hub, declined 2%. Meanwhile, stablecoin issuer Circle (CRCL) dropped nearly 4%. Beyond USDC, Circle operates the USYC tokenized Treasury product, which holds roughly $3 billion of assets.

Securitize ( SECZ ) , BlackRock's ( BLK ) tokenization partner and issuer of the BUIDL tokenized Treasury fund, was down 5% earlier in the session before it reversed losses, stabilizing after Thursday’s 27% plunge on missing earnings estimates.

The moves followed CoinDesk's report late Thursday that the Securities and Exchange Commission (SEC) was set to further delay its anticipated “innovation exemption,” which is expected to make it easier for companies to offer trading in tokenized securities. Concerns from the White House and Wall Street over the proposal's legal footing and potential market impact have held up the plan.

Adding to the uncertainty, the SEC canceled a meeting scheduled for Friday where commissioners planned to consider whether to propose new rules creating a tailored offering regime for certain investment contracts involving crypto assets.

The impact wasn't limited to stocks. The innovation exemption had also been expected to provide some regulatory relief for trading through decentralized finance venues, meaning the delay reaches beyond publicly traded tokenization companies. Uniswap's UNI (UNI), the native token of the decentralized exchange, fell 7% over the past 24 hours, making it the weakest performer in the CoinDesk 20 Index both Friday and this week.

For comparison, the Nasdaq 100, S&P 500 and bitcoin (BTC) were all mostly flat  during the day.

A ‘speed bump,’ not the end of the tokenization trade

“The tokenization theme hits a speed bump, but it doesn't alter the underlying momentum,” Lau said.

Coinbase and Bullish are already looking for ways to offer tokenized equities, while traditional exchanges including Nasdaq and the New York Stock Exchange are developing infrastructure for round-the-clock trading, Lau noted.

The bigger question is how quickly regulators allow those plans to move forward. The latest delay, particularly amid questions surrounding the CLARITY Act and the SEC's legal authority, could lengthen the adoption curve of tokenization, Lau added.