SEC approves Nasdaq's move to support tokenized securities trading

The SEC’s approval lets Nasdaq test blockchain-based versions of stocks that trade and settle like traditional shares.

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What to know:

• The Securities and Exchange Commission approved Nasdaq's plan to let certain securities trade in tokenized form, integrating blockchain technology into U.S. equity markets.
• Under the new framework, eligible Nasdaq participants can opt to settle trades as blockchain-based tokens that trade alongside traditional shares with the same tickers, prices and investor rights.
• Tokenization of stocks has emerged as a fast-growing sector, captivating major exchanges such as Nasdaq and NYSE parent ICE.

The U.S. Securities and Exchange Commission (SEC) approved on Wednesday Nasdaq’s proposal to allow certain securities to trade in tokenized form, a significant milestone to integrate blockchain tech into U.S. equity markets.

Nasdaq's tokenization plan ties into a pilot run by the Depository Trust Company (DTC), which will handle clearing and settlement of tokenized trades. Nasdaq filed for regulatory permission in September,

Under the framework, eligible Nasdaq participants can choose to have trades settled as blockchain-based tokens rather than through standard book-entry systems.

Tokenized shares will trade alongside traditional shares on the same order book and at the same price. They will carry identical rights, use the same ticker and CUSIP (identification number) and follow existing market rules.

The SEC said the structure meets investor protection standards, noting that surveillance, data reporting and settlement timelines remain intact.

The move comes as tokenization of traditional assets like stocks, bonds and funds have become a fast-growing sector in the digital asset space. The process allows near-instant, around-the-clock trading with tokens tied to real-world assets.

The trend has captivated major U.S. exchanges. Nasdaq said last week that it is developing a framework that would allow publicly listed companies to issue blockchain-based versions of their shares. It has teamed up with crypto exchange Kraken to distribute tokenized stocks globally. Meanwhile, Intercontinental Exchange (ICE), the owner of the NYSE, invested in crypto exchange OKX with plans to launch new tokenized stocks and crypto futures.

Read more: Here is why Nasdaq and owner of NYSE are putting the $126 trillion equity market on blockchain

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