TLDR
- The US Securities and Exchange Commission is reviewing a framework to allow tokenized stocks on crypto exchanges
- Nasdaq, Coinbase, Robinhood, and Kraken are pursuing tokenized equity offerings
- Blockchain settlement could replace the current two-day stock settlement process
- The tokenized equity market has doubled in value over the past 100 days
- Citadel Securities has urged caution to ensure real innovation over regulatory shortcuts
The United States Securities and Exchange Commission is examining a proposal that would enable blockchain-based versions of publicly traded stocks to be listed on regulated cryptocurrency exchanges. The framework would let investors purchase and sell digital tokens representing ownership in traditional companies through approved crypto platforms.
Sources familiar with the matter told The Information that the initiative is gaining support within the SEC’s market structure and innovation divisions. The plan remains in early development but represents a shift in regulatory thinking about digital assets.
SEC Chair Paul Atkins has publicly supported tokenization as an area where regulators should encourage innovation. He emphasized that tokenized assets could expand market access and lower operational costs. This marks a departure from the agency’s previous cautious stance on crypto-related financial products.
Major Players Enter Tokenized Stock Market
Several prominent financial institutions are already moving to capitalize on blockchain-based equity trading. Nasdaq filed a request with the SEC for permission to list tokenized securities on its exchange. The stock market operator sees blockchain technology as a way to modernize settlement infrastructure.
Coinbase is preparing an application to operate as a broker for digital equities. The crypto exchange giant views tokenized stocks as a natural extension of its existing trading services. Robinhood and Kraken have also launched tokenized stock products in international markets.
BlackRock established a dedicated tokenization division this year. The asset management firm’s entry into the space has encouraged other institutional investors to explore blockchain-based securities. Industry observers view this as validation of the technology’s potential.
Settlement Speed and Market Concerns
Proponents argue that blockchain technology could eliminate the two-day settlement window that currently exists for stock trades. Real-time settlement would reduce counterparty risk and free up capital more quickly. The technology would also decrease dependence on traditional clearinghouses.
However, not all market participants are enthusiastic about the changes. Citadel Securities submitted a letter to the SEC’s Crypto Task Force expressing reservations. The trading firm warned that regulators must verify tokenization provides genuine efficiency improvements rather than serving as a compliance workaround.
The letter emphasized that blockchain-based securities should succeed through real innovation. Citadel urged the agency to establish clear standards before approving tokenized equity trading.
Growth Projections and Current Market Size
The tokenized asset market has grown to over $31 billion across various blockchain networks. Stock tokens currently represent approximately 2% of that total. Despite the small percentage, the tokenized equity segment has experienced rapid growth recently.
Data shows the value of tokenized stocks has nearly doubled in the past 100 days. Binance Research published a report comparing current trends to the decentralized finance boom of 2020 and 2021. The research firm projects the tokenized stock market could surpass $1.3 trillion if 1% of global equities migrate to blockchain platforms.
Early tokenization efforts focused primarily on private credit and US Treasury bonds. Equities are now emerging as the next major category for blockchain-based financial instruments. The SEC’s decision on the proposed framework will likely determine how quickly this transition occurs.
