If you buy shares today, the process still runs on systems built decades ago. Trades are fast on your screen, but behind the scenes, settlement can take time. Now, that could start to change.
Nasdaq has secured approval from the U.S. Securities and Exchange Commission to test trading and settling stocks in tokenized form. This means some shares will be represented as digital tokens on blockchain infrastructure, while still carrying the same rights and value as traditional stocks.
Oluwajuwonlo Afolabi
What Tokenized Stock Trading Means for Investors
Tokenization turns real-world assets into digital tokens that live on a blockchain. Instead of replacing regular shares, the idea is to create a parallel digital version that trades on the same platform and follows the same rules.
Under the SEC’s approval, the pilot will be limited to selected securities within the Russell 1000 Index, which includes many of the largest publicly traded companies in the United States. It will also cover exchange-traded funds linked to major benchmarks like the S&P 500 and the Nasdaq 100.
According to the regulator’s filing, eligible participants can choose whether to trade these securities in their standard format or in tokenized form. Both versions will exist within the same exchange environment.
The goal is not to disrupt the market overnight. Instead, this is a controlled test to see whether tokenization can improve settlement speed, transparency, and operational efficiency without weakening investor protections.
Why Nasdaq Is Pushing for Tokenization
Nasdaq first proposed this idea last year as part of a broader effort to modernize market infrastructure. Nasdaq CEO Tal Cohen stated, "Blockchain technology has provided unprecedented possibilities to shorten the settlement cycle, modernize proxy voting, and automate corporate actions."
For decades, U.S. markets have relied on centralized clearing systems. While they are reliable, they can be slow and complex. Blockchain-based records could help reduce reconciliation steps and allow for near-instant settlement.
But the SEC review was not automatic. Regulators raised concerns about market surveillance and possible pricing differences between tokenized shares and traditional ones. Nasdaq addressed those concerns by clarifying how both versions would be monitored and priced to prevent gaps or manipulation.
The approval shows that regulators are open to testing blockchain tools, as long as existing investor protections remain intact.
A Broader Shift in U.S. Market Infrastructure
Nasdaq is not alone in exploring tokenization. The Depository Trust & Clearing Corporation has also received regulatory support to test blockchain-based initiatives. Meanwhile, Intercontinental Exchange, the parent company of the New York Stock Exchange, has backed projects exploring tokenized assets in partnership with crypto firms.
Nasdaq itself has been working with digital asset players, including Kraken and the tokenization platform Backed, to build the technical framework for issuing and managing tokenized shares.
All of this reflects growing demand from both traditional financial institutions and crypto-native firms to modernize how markets operate. Tokenization promises faster settlement, extended trading hours, and smoother global access. But it also raises new questions about oversight and risk management.
For now, this is just a pilot. Only selected participants will be able to take part, and the range of securities is limited. Still, the approval is significant. It shows that blockchain-based trading is moving from theory to real-world testing on one of the world’s largest exchanges.
Jemi Motesho
