Stock Market Giant Seeks Approval for Trading Tokens Representing Traditional Shares

In a groundbreaking move, Galaxy Digital, a leading cryptocurrency and digital asset investment firm, has tokenized its Nasdaq-listed stock, making it the first Nasdaq-listed company to do so. This development, if approved by the Securities and Exchange Commission (SEC), could pave the way for a new era of digital asset trading.

Galaxy Digital's tokenized equity differs significantly from models like Robinhood. Unlike these platforms that deal with synthetic products or wrapped representations, Galaxy Digital works directly with issuers to tokenize real shares. As a result, the tokenized Galaxy shares are equivalent to traditional equity, not derivatives or representations.

This move towards tokenization is seen as a transformative step, similar to how the internet revolutionized the information market. Galaxy Digital believes that tokenization will bring about a significant change in the value market.

The tokenized shares have several potential advantages. They could enable 24/7 trading and near-instant settlement, offering a more efficient trading experience. Ownership in a wrapped asset, however, is only as good as the price you can get for it in the secondary market or via primary market redemption.

Nasdaq has filed a regulatory filing to trade tokenized securities, a move that could lead to trading of tokenized equities and Exchange-Traded Funds (ETFs) under the existing regulatory frameworks. The Depository Trust Corporation (DTC) would clear and settle trades in token form.

However, tokenizing a security does not guarantee liquidity in the secondary market. The Security Token Market expects the SEC's approval and DTCC's infrastructure readiness for the tokenization of securities to be the bottlenecks, with a potential launch date in 2026.

Galaxy Digital partnered with fintech Superstate for tokenizing its securities on the Solana blockchain. Superstate, an SEC-registered transfer agent, records legal ownership on-chain with full compliance and permissioning, ensuring the integrity of the tokenized equity.

The industry needs a new framework to understand tokenized securities, according to Will Peck, head of digital assets at WisdomTree. Tokenized securities can be wrappers of off-chain shares, solely on-chain shares, or tokenized cash flows. The Nasdaq filing addresses concerns over different types of tokenized stocks by introducing native tokenization, which guarantees the same investor rights.

Chuck Mack, senior vice president of North American Markets for Nasdaq, and Tal Cohen, president of Nasdaq, have emphasized the potential benefits of blockchain technology. They believe it can lead to shorter settlement cycles, modernized proxy voting, and programmable means to manage corporate actions.

Mirror tokens also offer non-US investors exposure to US markets with less hassle, each with their own value adds. Tokenized shares can be traded peer-to-peer between investors who have passed Know Your Customer checks.

This development by Galaxy Digital marks a significant step towards the mainstream adoption of blockchain technology and tokenized securities. As more companies explore this avenue, we could witness a paradigm shift in the trading and investment landscape.

Stock Market Giant Seeks Approval for Trading Tokens Representing Traditional Shares