Nasdaq has submitted a proposal to the SEC to allow tokenized securities to trade on its exchange, seeking to integrate blockchain efficiencies with existing regulatory safeguards.

The Event in Detail

On September 8, 2025, Nasdaq formally submitted a rule change proposal to the U.S. Securities and Exchange Commission (SEC). This proposal aims to enable securities listed on the exchange to be traded as blockchain-based tokens alongside their traditional electronic forms. If approved, the system would offer investors the choice to settle positions conventionally or via tokenized versions of the same shares, with a target of Q3 2026 for central clearing infrastructure readiness. Crucially, Nasdaq mandates that tokenized stocks must possess identical rights, including voting, dividends, liquidation, and disclosure, as their traditional counterparts to be eligible for trading. These tokenized securities would also need to be fungible and share the same CUSIP number.

Nasdaq emphasized that minimal system adjustments would be required for market participants. The exchange’s proposal ensures that tokenized securities would trade on the same order book and with the same execution priority as their traditional counterparts, without degrading the National Best Bid and Offer (NBBO) or fragmenting the national market system. Clearing would remain anchored in the Depository Trust Co. (DTC), the backbone of U.S. securities settlement, though trade records would also be stored on distributed ledgers. This initiative represents a significant departure from previous "tokenized stocks" that often merely mapped prices without conveying true equity ownership, asserting a higher bar for equivalence to the underlying stock.

Business Strategy & Market Positioning

Nasdaq's strategy aims to capture the benefits of blockchain technology, such as faster settlement, modernized proxy voting, and programmable corporate actions, while ensuring these advancements mature within a framework of investor-first principles and existing regulatory safeguards. Tal Cohen, Nasdaq President, underscored the importance of embedding governance from the outset, stating the approach will "ensure tokenized securities trade as regular securities, safeguarding both investors' rights and the systemic stability of our markets through tested, resilient infrastructure."

This move by Nasdaq aligns with a broader accelerating interest in tokenization across Wall Street. For instance, Galaxy Digital, in partnership with Superstate, tokenized its GLXY shares on the Solana blockchain, marking a direct tokenization of SEC-registered public equity that conveys all associated rights. Superstate, as the SEC-registered transfer agent, records legal ownership on-chain in real-time. In contrast, Ondo Finance launched tokenized versions of US stocks and ETFs on Ethereum for qualified international investors, but these tokens do not provide ownership of the underlying assets, highlighting the distinction in approaches to tokenization and the regulatory bar Nasdaq is attempting to meet.

Market Implications

The approval of Nasdaq's proposal could significantly boost the Real World Assets (RWA) sector, which surged to a $25 billion market in Q2 2025, driven by institutional demand for yield and balance sheet efficiency. Tokenization offers structural advantages such as enhanced institutional yield and balance sheet efficiency, exemplified by BlackRock's BUIDL fund holding $2.88 billion in tokenized Treasuries. It also facilitates regulatory alignment and cross-border liquidity, crucial for institutional adoption and compliance with anti-money laundering (AML) and know-your-customer (KYC) requirements.

Furthermore, this development could accelerate the integration of tokenized assets into DeFi, where they can be used as collateral, contributing to the 72% surge in DeFi's Total Value Locked (TVL) to $127 billion in 2024. The potential for 24/7 global trading and reduced clearing costs could fundamentally shift capital market infrastructure. The SEC's consideration of generic listing standards for crypto and commodity-based ETFs, with a potential decision in September 2025, could further streamline new product launches, cutting approval timelines from over 240 days to 60-75 days.

However, potential risks include ongoing regulatory uncertainty. Empirical analysis indicates significant adverse market reactions, with returns plummeting 12% over one week post-announcement in some instances, reflecting prolonged regulatory uncertainty. Despite the rapid expansion of RWA issuance, secondary market liquidity remains a critical bottleneck. A 2025 study found that most tokenized RWAs exhibit low trading volumes, long holding periods, and limited investor participation due to structural barriers such as regulatory gating, custodial concentration, and valuation opacity. The BIS also warns that tokenized assets could amplify contagion if their volatility or interconnectedness with traditional markets is underestimated.

Broader Context

The convergence of decentralized finance (DeFi) and real-world assets (RWAs) in 2025 signifies a structural force reshaping institutional finance. Tokenization is increasingly seen as unlocking liquidity in traditionally illiquid markets and redefining risk-adjusted returns. Regulatory frameworks, such as the U.S. GENIUS Act, Singapore's CRS 2.0, and Hong Kong's securities issuance initiatives, are creating a legal infrastructure to reduce friction for tokenized asset issuance. This shift is also supported by a broader policy pivot in Washington D.C., with lawmakers drafting market-structure legislation to clarify the regulatory landscape for tokenized assets across the SEC and Commodity Futures Trading Commission (CFTC) jurisdictions, including standards for custody, audits, and reporting.