SEC Moves Toward Tokenized Stock Trading on Crypto Exchanges

SEC explores tokenized stock trading on crypto exchanges, signaling a major step toward merging blockchain technology with traditional financial markets.

The US Securities and Exchange Commission is reportedly preparing to allow blockchain-based versions of stocks to trade. According to The Information, the proposal would allow for the listing of tokenized equities on approved cryptocurrency platforms. If adopted, this plan would be a historic milestone towards the convergence of digital assets with mainstream finance.

Nasdaq and Companies Push Tokenized Stock Adoption

At an early stage, the SEC proposal envisions stock tokens to represent shares in public companies. They could be purchased and sold directly on regulated crypto exchanges. Nasdaq has already filed a rule change to allow for tokenized stock trading on its platform. The exchange aims to bring order to trading and settlement by mirroring traditional securities, to foster trust and reliability.

A number of companies are already testing out tokenization. Galaxy Digital is the first Nasdaq-listed company to tokenize its stock on Solana. Forward Industries quickly followed suit by announcing its intention to tokenize its FORD shares on the same blockchain

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Meanwhile, SharpLink announced plans to tokenize SBET stock on the Ethereum network, becoming the first firm to do so on the latter network. These moves demonstrate that tokenization is being viewed as a forward-looking financial innovation by businesses.

Top crypto exchanges are pushing for quicker approval. Coinbase and Robinhood have provided plans for adding tokenized equity trading to their platforms. Robinhood has already started tokenizing equities and offering them to European customers. Likewise, a synthetic stock token has been trialed in foreign markets by the company Kraken. These early adoptions are a sign of increasing confidence in the practicability of blockchain-based securities.

Tokenized Equities Could Cut Costs and Risks

Tokenizing is picking up pace as an institutional trend. As evidence of the mainstream interest in blockchain technology, earlier this year, BlackRock announced the formation of a dedicated tokenization division. Analysts point out that this acceptance provides a boost in the confidence of conventional financial institutions. There are real-world assets worth more than $31 billion tokenized in different blockchains, as per data. However, equities currently account for a very small part of that total.

Despite the momentum, there are still concerns. Citadel Securities has filed a letter to regulators cautioning blockchain settlement systems about possible vulnerabilities. The company called for the SEC to ensure that tokenization is genuinely efficient, rather than just an excuse to bypass compliance. This conservative stance is a product of the challenges of bringing disruptive technologies into highly regulated markets. Yet the pendulum is slowly swinging toward tokenization.

There are a number of potential advantages of tokenized equities, which observers have pointed out. Transactions could be settled more quickly, and counterparty risks would be minimized. Investors can also access new markets across the globe and have the ability to overcome such limitations. In addition, tokenization helps achieve greater transparency by offering an immutable record of data on public blockchains. The features are part of the SEC’s larger goal of modernizing market infrastructure.

If the proposal goes through, tokenized stock trading would be a watershed moment for financial markets. It would integrate traditional securities and blockchain with each other in a regulated setting. Experts believe that integration would reduce costs, improve efficiency, and appeal to new classes of investors. As a result, tokenization is becoming widely regarded as the next frontier of financial innovation.