SEC approves Nasdaq’s move to allow tokenized securities trading

The U.S. Securities and Exchange Commission (SEC) recently approved Nasdaq’s proposal to allow certain securities to trade in tokenized form, marking a significant step towards integrating blockchain technology into U.S. equity markets.

Nasdaq’s tokenization plan is part of a pilot program run by the Depository Trust Company (DTC), which will handle the clearing and settlement of tokenized trades. The regulatory permission for this initiative was filed by Nasdaq in September.

Under this framework, eligible Nasdaq participants will have the option to settle trades as blockchain-based tokens instead of using traditional book-entry systems. These tokenized shares will be traded alongside traditional shares on the same order book and at the same price. They will maintain identical rights, use the same ticker and CUSIP (identification number), and adhere to existing market rules.

The SEC has stated that this structure meets investor protection standards, emphasizing that surveillance, data reporting, and settlement timelines will remain unchanged.

The tokenization of traditional assets such as stocks, bonds, and funds has gained momentum in the digital asset space, enabling near-instant, around-the-clock trading with tokens representing real-world assets.

Major U.S. exchanges have been drawn to this trend, with Nasdaq announcing its development of a framework that would enable publicly listed companies to issue blockchain-based versions of their shares. Additionally, Nasdaq has partnered with crypto exchange Kraken to distribute tokenized stocks globally. On the other hand, Intercontinental Exchange (ICE), the owner of the NYSE, has invested in crypto exchange OKX with plans to launch new tokenized stocks and crypto futures.

This move towards tokenization reflects the growing interest in leveraging blockchain technology to revolutionize traditional financial markets. With the approval of Nasdaq’s proposal, the integration of blockchain into U.S. equity markets is now a reality. This development signals a new era of innovation and efficiency in the trading of securities.