NEW YORK : Nasdaq is working with U.S. regulators to introduce trading of tokenized securities, becoming the latest major financial player on Wall Street to double down on a boom in tokenization amid an easing of crypto regulations under the Trump administration.
If approved, the move would mark the first instance of tokenized securities being allowed to trade on a major U.S. stock exchange, and also signify the most ambitious attempt yet by an exchange operator to bring blockchain-based settlement into the national market system.
Nasdaq on Monday filed a proposal with the U.S. Securities and Exchange Commission to tweak its rules to allow for trading of listed stocks and exchange-traded products on its main market in “either traditional digital or tokenized form.”
The filing comes days after the SEC unveiled its rulemaking agenda, which included a potential amendment of its rules to allow for crypto to be traded on national securities exchanges and alternative trading systems.
Investor demand for tokenized assets is rising globally. Proponents of the crypto industry have argued that tokenization can improve liquidity in the financial system.
Coinbase, the largest U.S. crypto exchange, has also previously sought permission from the SEC to offer “tokenized equities” to its customers. Some major global banks, including Bank of America and Citigroup have said they could explore launching tokenized assets, including stablecoins.
Neither the New York Stock Exchange nor Cboe Global Markets responded to requests for details on any plans they may have in the works regarding tokenization.
In its filing on Monday, Nasdaq said it believes the markets can use tokenization while “continuing to provide the benefits and protections of the national market system.”
“Wholesale exemptions from the national market system and related protections are neither necessary to achieve the goal of accommodating tokenization, nor are they in investors’ best interests,” Nasdaq said.
In a post on his LinkedIn profile, Tal Cohen, president of Nasdaq, said the integration of tokenization and traditional markets offers “an extraordinary opportunity” to accelerate trade settlements, automate processes and improve efficiency.
However, the World Economic Forum, in a report released in May, pointed to a lack of sufficient secondary-market liquidity as well as the lack of a clear global standard as two major challenges for adoption while the World Federation of Exchanges voiced concern and called on regulators to crack down on the rush to tokenization.
Others have cautioned that tokenization could introduce new systemic risks, especially in the absence of stringent regulation. In July, Hester Peirce, a commissioner at the SEC who has frequently spoken positively about cryptocurrency, said tokenized securities would not be able to circumvent existing securities laws.
In its filing, Nasdaq referred to Peirce’s earlier statement and said its latest proposal to trade tokenized securities would exist within that context.
‘SAME MATERIAL RIGHTS’
The term “tokenization” is used in a variety of ways, but generally refers to the process of turning financial assets – such as bank deposits, stocks, bonds, funds and even real estate – into crypto assets.
Under new SEC Chair Paul Atkins, the agency has been attempting to revamp cryptocurrency regulations and reduce rules Wall Street has criticized as overly burdensome. If the latest policies are adopted, they would represent a major win for the digital asset industry, which has long pushed for tailored rules that would enable crypto to become more enmeshed with traditional finance.
On Monday, Nasdaq said that trading of tokenized stocks in Europe is taking place in a way that is “raising concerns” as some trading platforms are offering investors access to tokenized U.S. equities, but they are not providing investors with actual shares in companies.
As part of its new proposal, Nasdaq argued it would raise the bar for tokenized securities to have “the same material rights and privileges as do traditional securities of an equivalent class.” If those conditions are met, then Nasdaq will trade tokenized securities together with traditional securities “on the same order book and according to the same execution priority rules,” it said.
“The exchange will not treat tokenized instruments to be equivalent to their traditional counterparts if they do not convey such rights, in whole or in material part … but instead the exchange will treat these instruments as distinct,” Nasdaq added.
If Nasdaq’s proposal is approved and once the central clearing agency’s infrastructure is live, investors could buy a share on Nasdaq and have it settle in token form without changing how orders are routed, priced, surveilled or reported.
U.S. investors could see the first token-settled trades of securities by the end of the third quarter of 2026, assuming the Depository Trust Company’s infrastructure is in place by then, Nasdaq said.
Marcin Kazmierczak, co-founder of RedStone, a crypto platform that works with decentralized finance projects, said he believes that the conditions for tokenization to work at scale finally appear to be in place, pointing to the more favorable regulatory environment, improvements in blockchain technology and growing institutional investor interest in tokenization initiatives.
