Stock exchange Nasdaq moves forward with plans for trading digital assets representing traditional securities

In a significant move for the crypto industry, Nasdaq has filed a proposal with the U.S. Securities and Exchange Commission (SEC) to allow trading of listed stocks and exchange-traded products in digital or tokenized form.

Under the proposal, investors could buy a share on Nasdaq and have it settle in token form without altering how orders are routed, priced, surveilled, or reported. This move could potentially revolutionise the financial market, making it more efficient and accessible.

The term "tokenization" refers to the process of turning financial assets into crypto assets, including stocks, bonds, funds, and real estate. Proponents of the crypto industry argue that tokenization can improve liquidity in the financial system.

If approved, Nasdaq's proposal would require tokenized securities to have the same material rights and privileges as traditional securities of an equivalent class. This means that tokenized securities would be treated identically to their traditional counterparts, ensuring investor protection and maintaining the integrity of the market.

If the conditions are met, Nasdaq will trade tokenized securities together with traditional securities on the same order book and according to the same execution priority rules. This integration could provide a seamless experience for investors, regardless of whether they are trading traditional or tokenized securities.

The Depository Trust Company (DTC) will be responsible for the central clearing infrastructure to negotiate and settle tokenized stocks on Nasdaq, provided the necessary blockchain infrastructure is operational by the end of Q3 2026.

The SEC's rulemaking agenda includes a potential amendment of its rules to allow for crypto trading on national securities exchanges and alternative trading systems. Under new SEC Chair Paul Atkins, the agency has been attempting to revamp cryptocurrency regulations and reduce rules Wall Street has criticized as overly burdensome.

If Nasdaq's proposal is approved and the central clearing agency's infrastructure is live, U.S. investors could see the first token-settled trades of securities by the end of the third quarter of 2026. The World Economic Forum has identified a lack of sufficient secondary-market liquidity and the lack of a clear global standard as major challenges for adoption of tokenization.

Marcin Kazmierczak, co-founder of RedStone, a crypto platform that works with decentralized finance projects, believes that the conditions for tokenization to work at scale are finally in place, citing a more favorable regulatory environment, improvements in blockchain technology, and growing institutional investor interest in tokenization initiatives.

Major global banks, including Bank of America and Citigroup, have expressed interest in launching tokenized assets, including stablecoins. Investor demand for tokenized assets is rising globally.

If those conditions are met, this would be the first instance of tokenized securities trading on a major U.S. stock exchange. Nasdaq's proposal to trade tokenized securities would exist within the context of SEC commissioner Hester Peirce's earlier statement that tokenized securities cannot circumvent existing securities laws.

The SEC's potential amendment of its rules to allow for crypto trading on national securities exchanges and alternative trading systems could pave the way for wider adoption of tokenization in the U.S. financial market, making it more efficient, accessible, and inclusive.

Stock exchange Nasdaq moves forward with plans for trading digital assets representing traditional securities