Ondo Finance has called on the US Securities and Exchange Commission (SEC) to postpone or reject Nasdaq’s proposal for trading tokenized securities, citing concerns about transparency and the potential for established market players to gain an unfair advantage.
In a letter to the regulator on Wednesday, Ondo—a blockchain company providing tokenized versions of traditional assets—argued that regulators and investors cannot adequately assess Nasdaq’s proposal without public insight into how the Depository Trust Company (DTC) will manage blockchain settlements. DTC acts as the primary depository for US securities and manages their post-trade settlement.
While expressing support for Nasdaq’s transition toward tokenization, Ondo cautioned that “the reference to non-public information implies unequal access, leaving other firms without a fair chance to provide feedback.”
Additionally, the company remarked that Nasdaq’s rule cannot be implemented until DTC finalizes its system, suggesting that there is no disadvantage in delaying approval until more functionalities are available. Ondo urged the SEC to prioritize “open collaboration and transparent standards” prior to reaching a final verdict.
Ondo’s correspondence is a response to Nasdaq’s filing with the SEC on Sept. 8, in which the world’s second-largest stock exchange sought to amend its regulations to allow trading in tokenized securities.
Tokenized shares are digital counterparts of traditional stocks recorded on a blockchain.
If approved, the proposal would enable the trading of tokenized shares alongside traditional ones, with settlements processed through the DTC’s upcoming system for tokenized securities.
Nasdaq’s proposal was published in the Federal Register on Sept. 22, initiating the SEC’s 45-day review period, set to conclude in early November or late December if extended.
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The push for tokenized stocks
The current discussion surrounding the tokenization of Nasdaq stocks comes as various platforms have either launched or are planning to introduce tokenized versions of US equities.
On June 30, Robinhood launched a layer-2 blockchain to facilitate trading in tokenized US stocks and ETFs for European users, announcing it would list over 200 US equities and funds as on-chain tokens.
eToro has also revealed plans to introduce tokenized stocks as ERC-20 tokens on Ethereum, stating that the rollout will encompass 100 popular US-listed stocks and ETFs available for trading 24/5.
Kraken is also riding the trend, having launched a tokenized securities platform in September, making tokenized shares accessible to eligible customers in Europe.
Galaxy Digital has cautioned that the ongoing tokenization initiatives might jeopardize the New York Stock Exchange’s supremacy, stating in July that it poses a challenge to the liquidity of traditional markets.
Magazine: Robinhood’s tokenized stocks have stirred up a legal hornet’s nest
