Blockchain to Paper: SEC Considers Nasdaq's Equity Tokenization Shift

The U.S. Securities and Exchange Commission (SEC) is reportedly considering a proposal to permit blockchain-based stock trading, signaling a potential shift in how traditional financial assets are managed. Nasdaq, the major U.S. stock exchange, has submitted a formal request to the SEC to tokenize equity securities and exchange-traded products (ETPs), aiming to integrate blockchain technology into mainstream trading while maintaining existing investor protections. The proposal, outlined in a Form 19b-4 filing, seeks to amend Nasdaq's rules to allow tokenized stocks to trade with the same execution priority and documentation standards as traditional equities. This move aligns with broader industry efforts to leverage blockchain for faster, more transparent settlements and fractional ownership of assetsTokenized Stocks rise 220% reminiscent of 'early DeFi boom'^[4].

Nasdaq's proposal emphasizes that tokenized shares would retain the same rights and privileges as their traditional counterparts, including voting rights and access to liquidation proceeds. The exchange also proposed clear labeling of tokenized assets to ensure seamless handling by clearing firms and the Depository Trust Company (DTC). Notably, tokenized securities would be traded on the same order book as traditional assets, provided they meet criteria such as fungibility, shared CUSIP numbers, and equivalent shareholder rights. Nasdaq's filing underscores the need for regulated markets to prevent fragmentation and ensure market transparency, warning that exemptions from national market system (NMS) connectivity could erode investor protectionsTokenized Stocks rise 220% reminiscent of 'early DeFi boom'^[4].

This development follows a regulatory shift under SEC Chair Paul Atkins, who has prioritized blockchain adoption as part of the agency's "Project Crypto" initiative. In May 2025, Atkins compared the transition of securities to blockchain-based systems to the evolution of audio recordings from analog to digital formats, highlighting the potential for "entirely new methods of issuing, trading, and owning securities"Nasdaq Seeks Nod From U.S. SEC to Tokenize Stocks - CoinDesk^[1]. The SEC's recent joint statement with the Commodity Futures Trading Commission (CFTC), issued on September 2, 2025, further clarified that registered exchanges can legally list and trade spot crypto assets, including leveraged or margined products. This regulatory clarity has been hailed as a turning point for the industry, reducing legal ambiguity and encouraging institutional participationA Regulatory Turning Point: What the SEC and CFTC’s Green Light Means for Spot Crypto Trading in the U.S.^[2].

Market momentum for tokenized assets is accelerating. Binance Research reported a 220% monthly surge in tokenized stock market capitalization in July 2025, reaching $370 million, driven by platforms like Securitize and Backed Finance's xStocks. Over 60 tokenized stocks, including blue-chip equities like Amazon and Apple, are now traded on exchanges such as Kraken and Bybit. Analysts estimate that tokenizing just 1% of global equities could create a $1.3 trillion market, significantly boosting demand for Ethereum (ETH) and Solana (SOL) as settlement infrastructuresTokenized Stocks Surge 220% in July, Eyeing $1.3 Trillion Market Potential^[5]. This growth mirrors the 2021 DeFi boom, where total value locked (TVL) expanded from $1 billion to $100 billion in under two yearsTokenized Stocks Surge 220% in July, Eyeing $1.3 Trillion Market Potential^[5].

The convergence of blockchain and traditional finance is also evident in institutional adoption. Major players like BlackRock and State Street are exploring tokenized funds and treasury products, while J.P. Morgan tested tokenized deposits on a public blockchain. Regulators in the U.S. and Europe are increasingly recognizing the benefits of tokenization, including 24/7 trading, reduced transaction costs, and enhanced transparency. However, challenges remain, including regulatory harmonization, custody solutions, and infrastructure scalability. The SEC and CFTC have pledged to collaborate on a joint roundtable in September 2025 to address these issues, focusing on decentralized finance (DeFi) and innovation in product designA Regulatory Turning Point: What the SEC and CFTC’s Green Light Means for Spot Crypto Trading in the U.S.^[2].

Nasdaq's push for tokenization reflects a broader industry trend toward hybrid financial systems. While early-stage tokenization has focused on replicating traditional assets, industry leaders argue that the ultimate goal is to create a decentralized, internet-like financial ecosystem. Mark Greenberg of Kraken emphasized that tokenized equities should not merely replicate "Wall Street on a blockchain" but instead offer always-on, self-directed, and globally accessible platformsTokenized Stocks Surge 220% in July, Eyeing $1.3 Trillion Market Potential^[5]. If successful, this shift could democratize access to capital markets, enabling smaller investors to participate in assets previously reserved for institutional players.

The regulatory and market developments underscore a pivotal moment for blockchain in finance. As the SEC evaluates Nasdaq's proposal and tokenized assets gain traction, the U.S. is positioning itself as a global leader in crypto innovation. With infrastructure, compliance frameworks, and investor protections evolving, the path to mainstream adoption appears clearer, though challenges such as market depth and cross-border regulatory alignment will require ongoing collaborationA Regulatory Turning Point: What the SEC and CFTC’s Green Light Means for Spot Crypto Trading in the U.S.^[2].