- Nasdaq intends to integrate both tokenized and traditional securities on a unified order book.
- Settlements will still be processed via DTCC systems, even with blockchain integration.
- Industry reactions vary as regulators evaluate legal and operational implications.
The US Securities and Exchange Commission is initiating a formal review to ascertain if tokenized shares can be traded on Nasdaq, placing blockchain-based securities under scrutiny.
By inviting public comments on Nasdaq’s proposed rule change, the SEC is exploring how digital representations of stocks fit within current market frameworks.
This initiative highlights an increasing interest in tokenization throughout financial markets, while emphasizing regulators’ concerns about legal clarity, settlement reliability, and investor safeguarding.
Any ruling will likely impact the pace at which blockchain technology is integrated into conventional equity trading.
Per the SEC document, Nasdaq has requested approval to list and trade securities in a tokenized format.
This action has launched a wider consultation addressing regulatory, technical, and policy factors.
The review will assess if tokenized shares can co-exist with traditional equities without jeopardizing essential market protections.
Regulatory review kicks off
Under Nasdaq’s proposal, tokenized stocks and exchange-traded products would operate side-by-side with conventional shares.
Both types would be listed on the same order book and offer identical shareholder rights.
Clearing and settlement would remain under the control of the Depository Trust and Clearing Corporation, while blockchain tech would enhance operational efficiency.
The SEC’s request for public feedback indicates that approval is not guaranteed.
Regulators are instead considering whether tokenized securities can achieve quicker and cheaper settlements without introducing new risks.
The consultation signifies the beginning of a thorough evaluation rather than a conclusive decision.
How tokenized shares could be traded
If approved, Nasdaq’s framework would enable blockchain-based shares to trade similarly to standard stocks.
Investors would not need separate systems or accounts, as tokenized and conventional securities would function in the same trading environment.
Settlements would still depend on DTCC systems, ensuring consistency with existing market practices.
Experts contend that this setup upholds investor protections while allowing blockchain to shorten settlement durations and reduce operational expenses.
The SEC’s evaluation will determine whether these efficiency improvements outweigh the potential complexities introduced by tokenized record management.
Diverse industry opinions
Market responses to the proposal have been varied. Industry representatives have expressed support, citing the potential for tokenization to boost market efficiency and modernize post-trade activities.
Regulatory changes in other areas also imply a growing willingness.
The US Commodity Futures Trading Commission has sanctioned a pilot program allowing tokenized assets as collateral, demonstrating wider acceptance of blockchain-based financial products.
Nonetheless, opposition has arisen from firms like Ondo Finance and Cboe Global Markets.
These organizations argue that the SEC should postpone approval until the DTCC clarifies how tokenized trades will be settled.
Their concerns revolve around the reliance on DTCC infrastructure, emphasizing the necessity for clear settlement procedures.
