Nasdaq has received approval from the SEC for a new framework that allows the trading of tokenized securities, marking a significant step in integrating blockchain technology into U.S. equity markets. This development enables certain stocks and ETFs to be issued and settled as blockchain-based tokens, while still trading alongside traditional shares.
With this regulatory endorsement, investors will have the opportunity to hold tokenized versions of securities in digital wallets, with the Depository Trust & Clearing Corporation (DTCC) managing the clearing and settlement processes. However, industry experts note that this initiative does not fundamentally change the existing market structure but rather enhances post-trade operations.
Brian Steele, an executive at DTCC, emphasized the goal of creating secure tokenization services aimed at fostering a more resilient and efficient financial system. The collaboration with exchanges and market participants is expected to facilitate wider adoption of these technologies.
One of the main advantages of tokenizing stocks is the potential for continuous trading. Traditional equity markets operate within fixed hours and involve lengthy settlement cycles. By utilizing blockchain, the prospect of near-instant settlement and around-the-clock trading becomes feasible.
Val Gui, general manager at Kraken’s tokenized stock platform xStocks, described the SEC’s approval as a clear indicator that the $126 trillion equity market is transitioning to blockchain technology. He envisions a future where stock ownership can occur globally and at any time.
Ian De Bode, president of the tokenization firm Ondo, noted that this development is a positive step toward achieving 24/7 markets, albeit within a controlled environment. He highlighted that global investors will be the primary beneficiaries, as they have historically faced challenges in accessing U.S. equities at all hours.
Despite these advancements, Nasdaq’s approach does not replace the traditional financial system but extends its capabilities to include on-chain securities. Tokenized shares will still be traded through brokers and settled via DTCC, with blockchain serving mainly as an alternative record of ownership.
Maylea Ma, deputy general counsel at 1inch, pointed out that while investors may experience quicker settlements and enhanced ownership features, these benefits will remain within a permissioned framework that still relies on intermediaries. She cautioned that without broader connectivity to on-chain liquidity and non-custodial execution, efficiency improvements may be limited.
While this initiative represents progress, experts believe the U.S. is still trailing behind other regions in adopting tokenization. Jesse Knutson, head of operations at Bitfinex Securities, noted that countries like Kazakhstan and El Salvador have already embraced tokenized securities with fewer regulatory hurdles, allowing for more direct investor access and blockchain-native settlement.
Despite the U.S. overseeing the largest equity market globally, valued at approximately $62 trillion, the entrenched market structure focused on investor protection and centralized clearing presents challenges for adopting newer blockchain-based models. Nevertheless, the SEC’s decision signals a clear trajectory: tokenization is on the horizon for public markets, albeit shaped by existing institutions and regulations.
Nasdaq has gained SEC approval to implement a framework for trading tokenized securities, integrating blockchain into U.S. equity markets. While this marks progress, the approach maintains existing market structures and may not fully capitalize on the potential of blockchain technology.