Nasdaq’s Tokenized Securities Proposal Faces SEC Scrutiny - Will It Break Wall Street’s Mold?

Wall Street's digital revolution just hit a regulatory speed bump. Nasdaq's ambitious push to tokenize traditional securities now sits under the SEC's microscope, testing the boundaries between legacy finance and blockchain's promise.

The Regulatory Gauntlet

Forget smooth sailing—this proposal runs straight into the SEC's complex web of investor protection rules and market structure regulations. Approval isn't a checkbox exercise; it's a high-stakes negotiation that could redefine what a "security" looks like on-chain. The agency's scrutiny focuses on custody, settlement finality, and whether blockchain transparency actually prevents the old games Wall Street plays.

Why This Fight Matters

Tokenization isn't just tech buzz—it promises to slash settlement times from days to minutes and unlock liquidity in frozen assets. Nasdaq's move signals that traditional finance giants aren't just watching crypto; they're trying to co-opt its best features. But they're learning what crypto natives already know: regulators love innovation until it challenges their rulebooks.

The Institutional Stakes

Hedge funds and asset managers watch closely. Approval could open floodgates for trillions in tokenized real-world assets. Rejection? Another reminder that finance's future gets written by lawyers first, technologists second. The proposal essentially asks: Can blockchain efficiency survive contact with 90-year-old securities laws?

Look for compromises—maybe approved pilots with capped volumes, or tokenization limited to institutional players only. The SEC wants progress without chaos; Nasdaq wants a first-mover advantage. Their dance will set the template for every exchange eyeing this space. One cynical take? Wall Street always finds a way to charge fees, whether the ledger is paper or cryptographic—some traditions never tokenize.

TLDR

• The SEC has started proceedings to review Nasdaq’s proposal to list and trade tokenized securities.
• Nasdaq’s plan aims to enhance market efficiency and transparency by offering tokenized securities.
• The SEC has called for public comments on Nasdaq’s proposal, focusing on investor protection and market integrity.
• Some industry groups support Nasdaq’s tokenized securities plan while others have raised concerns.
• The SEC’s review follows its no-action letter to the DTCC, allowing tokenization of certain assets.

The U.S. Securities and Exchange Commission (SEC) has initiated proceedings regarding Nasdaq’s proposal to launch tokenized securities trading. The SEC is reviewing the proposal to determine if Nasdaq can list and trade tokenized securities, such as stocks, on its platform. The decision follows a no-action letter issued by the SEC to the Depository Trust & Clearing Corporation (DTCC) for tokenizing real-world assets.

SEC Seeks Public Comment on Nasdaq’s Proposal

The SEC has called for public comments to assess the impact of Nasdaq’s proposed rule change. The commission is considering the legal and policy implications of tokenized securities trading. According to the SEC, the institution of proceedings is necessary to address concerns around market integrity and investor protection.

The commission has already received feedback on the proposal. Supporters, including the Securities Industry and Financial Markets Association (SIFMA), have voiced approval for Nasdaq’s plan. However, Cboe Global Markets, Better Markets, and ONDO Finance have opposed the introduction of tokenized securities on Nasdaq.

The SEC has focused on several issues in the comments process. These include ensuring that technological safeguards are in place to prevent fraud and market manipulation. The agency also wants to ensure that the new trading system complies with existing regulatory standards.

Nasdaq’s Plans for Tokenized Securities

Nasdaq aims to offer tokenized securities on its platform. This WOULD involve the listing and trading of securities in digital form, which could improve market transparency. The platform would provide faster settlement times, improving overall market efficiency.

Galaxy Digital, a company listed on Nasdaq, has already taken steps to tokenize its common stock. The stock has been tokenized on the solana blockchain, marking a milestone in Nasdaq’s efforts to lead the tokenized securities market.

The SEC’s review of Nasdaq’s proposal is a critical step for the broader adoption of tokenized securities in traditional finance. If the proposal is approved, the DTC would be responsible for clearing and settling tokenized securities. This would occur after the SEC grants its approval, marking a significant development for the financial markets.

SEC and DTCC Collaboration on Tokenization

The SEC recently issued a no-action letter to the DTCC, enabling it to tokenize certain custody assets. The DTCC’s goal is to bridge traditional finance (TradFi) with decentralized finance (DeFi), contributing to a more efficient and inclusive financial system.

With this approval, the DTCC would play a key role in clearing and settling tokenized securities. The SEC’s decision to allow tokenized transactions on Nasdaq represents a potential step toward transforming financial markets.