Blockchain Meets Wall Street as Nasdaq Pursues Tokenized Trading

Nasdaq is seeking U.S. Securities and Exchange Commission (SEC) approval to trade tokenized versions of equity securities and exchange-traded products (ETPs) on its markets, marking a significant step in integrating blockchain technology into traditional financial infrastructure. The proposal aims to facilitate tokenized securities trading within existing regulatory and market frameworks, leveraging the Depository Trust Company (DTC) for clearing and settlement while ensuring that these tokenized assets maintain the same rights, benefits, and identifiers—such as CUSIP—as their traditional counterparts. This move is part of a broader effort to align financial innovation with investor protections, market stability, and regulatory compliance.

Tokenized securities represent traditional financial assets like stocks or bonds that are digitally represented on a blockchain or distributed ledger system. Unlike traditional digital representations, which do not utilize distributed ledger technology, tokenized securities offer a more transparent and efficient means of ownership and transaction processing. The key distinction is that while the technology used differs, the underlying asset and its value remain identical. This approach supports faster settlement, improved auditability, and potentially enhanced liquidity, particularly for global investors seeking access to U.S. markets.

Nasdaq’s proposed rule changes would allow market participants to choose whether to trade in traditional or tokenized form, with the DTC handling the clearing and settlement of tokenized trades. Both types of shares would be subject to the same regulatory oversight, trading rules, and market identification systems. The firm emphasizes that the goal is to provide choice to investors and market participants while maintaining the integrity of U.S. equity markets. It also seeks to avoid fragmentation by ensuring that tokenized and traditional versions of the same asset do not exist across multiple blockchains or platforms under differing rules.

This initiative comes amid a growing interest in blockchain-based financial instruments, with major asset managers like BlackRock, Franklin Templeton, and KKR exploring tokenization. However, most tokenized shares to date have been issued by third-party platforms rather than directly by companies listed on traditional exchanges like Nasdaq. This has raised concerns about investor clarity and the potential for misrepresentation, as seen in the case of Robinhood offering tokenized shares of OpenAI, which the company did not officially endorse. Nasdaq has also expressed caution about ensuring that issuers retain control over how and where their securities are traded.

Regulatory clarity remains a central challenge. SEC Chair Paul Atkins has directed the agency to develop clear guidelines for when digital assets qualify as securities, while Commissioner Hester Peirce has emphasized the need for proper disclosure and transparency in tokenized assets. Nasdaq’s proposal aligns with this evolving regulatory landscape by proposing a structured integration of tokenized assets into existing infrastructure. It also reflects broader industry interest in leveraging blockchain for faster, more transparent, and globally accessible trading systems. If approved, the initiative could set a precedent for how traditional financial institutions adopt and scale tokenization while maintaining core market principles such as liquidity, transparency, and investor protection.