In a significant move towards integrating blockchain technology into traditional finance, Nasdaq is seeking approval from the U.S. Securities and Exchange Commission (SEC) to allow stocks to be traded on the blockchain. The proposal, made on Monday, aims to give investors the option to trade equities either through conventional methods or utilizing tokenized stock options, positioning these tokenized assets with equal priority in the trading landscape.
Nasdaq advocates for the tokenization of assets within regulated markets, including national securities exchanges and alternative trading systems supervised by the Financial Industry Regulatory Authority (FINRA). The exchange believes that tokenization can coexist with the existing national market system while maintaining the necessary safeguards and benefits.
This initiative follows the example set by digital brokerage Robinhood, which recently began offering stock tokens to its European customers, encompassing around 200 U.S. stocks and exchange-traded funds (ETFs). The push to transfer real-world assets onto blockchain platforms has gained traction, with both traditional financial institutions and cryptocurrency exchanges vying for a foothold in this emerging market.
Notably, renowned crypto exchanges like Bybit, Kraken, and Gemini have already begun their foray into tokenized stock trading. However, Nasdaq stands out as a key player due to its association with major tech giants such as Apple, Amazon, and Microsoft.
According to Nasdaq, trading tokenized stocks will mirror the current trading practices, with clear and settlement processes handled through the Depository Trust Company (DTC). The proposed changes stipulate that orders involving tokenized securities will be executed without affecting their priority.
Under Nasdaq’s proposal, transactions will be recorded via a digital ledger, which offers innovative capabilities for tracking ownership and transactions. Investors purchasing these tokens will maintain full rights to the underlying shares, including voting and liquidation rights.
The introduction of tokenized trading—encompassing stock and exchange-traded products like ETFs—will commence once the necessary infrastructure and post-trade settlement services are established by the DTC. Nasdaq aims to enrich the financial ecosystem by introducing these advancements, as highlighted by Nasdaq President Tal Cohen in a recent LinkedIn post.
SEC Chairman Paul Atkins has signaled that asset tokenization is a top priority for the regulator. Earlier this year, he organized a panel during the agency’s crypto roundtables to discuss this initiative further. Atkins has drawn parallels between tokenizing securities and the historical evolution of audio formats, suggesting that the shift to on-chain securities could transform various aspects of the market by facilitating new methods of issuance, trading, ownership, and usage of securities.
The growing momentum around blockchain-based securities is a clear indication of the industry’s shifting dynamics, as financial entities explore ways to harness the efficiency and security offered by digital technologies.
