In a bold move to integrate blockchain technology with traditional finance, Nasdaq's crypto division head has declared a commitment to expedite the adoption of tokenized stocks. This initiative aims to bring blockchain-based settlement into the national market system.

Nasdaq has already filed a proposal with the U.S. Securities and Exchange Commission (SEC) to allow tokenized versions of listed stocks and exchange-traded funds (ETFs) to trade on the same order book as their traditional counterparts. If approved, this could happen as early as the third quarter of 2026. The proposal seeks to amend security definitions, enabling tokenized versions to trade under the same rules as conventional stocks.

Under the Nasdaq proposal, tokenized shares must carry the same rights and privileges as the underlying security to qualify for unified trading and execution priority. This includes identical voting and liquidation rights. The exchange emphasized that tokenized assets would be treated the same as conventional stock trades, with clearing and settlement running through the Depository Trust Company (DTC). Nasdaq also seeks to ensure clear labeling for tokenized securities to facilitate proper processing by clearing and settlement entities.

The move towards tokenization is driven by the potential for faster trading and settlement, as well as the ability to trade assets outside of normal exchange hours. Nasdaq President Tal Cohen stated that the proposal aims to provide meaningful benefits to markets by integrating new capabilities into the financial system.

Nasdaq's initiative has received support from some quarters, with proponents arguing that it could democratize access to capital markets by enabling fractional ownership of high-value assets. Tokenization lowers barriers for retail investors and promotes financial inclusion.

However, the proposal also faces challenges and concerns. Some critics warn of potential systemic risks from fragmented markets. The World Federation of Exchanges (WFE), which includes Nasdaq and Deutsche Boerse, has urged regulators worldwide to crack down on unlicensed tokenized equity platforms, citing investor and reputational risks. They insist that innovation must occur within existing regulatory frameworks. There are also concerns that retail traders may not understand the difference between owning a token linked to a stock and holding the real equity itself.

Despite these concerns, Nasdaq is pushing forward with its plans, emphasizing that markets can adopt tokenization without waiving core investor protections. The exchange operator has voiced concerns about some overseas platforms that market tokenized U.S. equities without conferring full shareholder rights, positioning its approach as a higher standard that requires equivalence to the underlying stock.

The SEC is currently reviewing Nasdaq's proposal. The regulatory body is also considering an "innovation exemption" that would allow crypto companies to offer blockchain-based tokens representing exposure to listed stocks. However, the WFE and others are lobbying against relaxed SEC crypto regulation, arguing that it could allow firms outside the traditional financial system to compete directly with exchanges and brokers that face stricter compliance obligations.

As the SEC weighs its options, the future of tokenized stocks in the U.S. remains uncertain. However, Nasdaq's commitment to "move as fast as we can" suggests that the exchange operator is determined to play a leading role in shaping the evolution of financial markets.