Nasdaq And Tokenized Stocks: Is Blockchain Entering Wall Street's Core?

Author | Aki WuBlockchain

This article does not constitute investment advice. Readers should strictly comply with the laws and regulations of their jurisdictions and refrain from participating in any illegal financial activities.

On September 8, 2025, Nasdaq filed a landmark proposed rule change with the U.S. Securities and Exchange Commission (SEC) seeking to amend exchange rules to permit the trading of tokenized securities on its markets. If approved, this would pave the way for Nasdaq-listed equities — such as Apple and Amazon — to be traded and settled in blockchain-based token form on Nasdaq. It would constitute the first instance of a major U.S. securities exchange allowing trading in tokenized equities, and mark the first large-scale incorporation of blockchain technology into the core of Wall Street’s market infrastructure.This article systematically outlines the proposal’s key elements and underlying motivations, analyzes the potential market ramifications — including impacts on the “U.S. equities on-chain” theme and related sectors — and sketches possible development paths for this innovation.

Proposal Highlights: A Detailed Look at Nasdaq’s Rule Amendments

Nasdaq’s Rule 19b-4 filing to the SEC centers on allowing member broker-dealers and investors to opt to trade and settle Nasdaq-listed equity securities and exchange-traded products (ETPs) in tokenized form. The submission proposes the following rule changes:

1. Expand the definition of “security” to add a tokenized form (Equity 1, Section 1)

The proposal amends the Exchange’s definition of “security,” expressly affirming that “a tokenized security is still a security,” rejecting “island-style” markets decoupled from the primary market, and broadening the term to cover two modalities:

● Traditional form: a digital book-entry representation of asset ownership and rights without the use of distributed-ledger or blockchain technology — i.e., the current U.S. equity electronic book-entry model that ultimately corresponds to certificated securities.

● Tokenized form: a digital representation of ownership and rights recorded and transferred using blockchain / distributed-ledger technology (DLT) — in short, issuing the equity interest on-chain and representing it as tokens for trading and settlement.

Nasdaq makes clear that a tokenized security will be treated as equivalent to its traditional counterpart — and allowed to trade on the same order book — only if the tokenized form is fully fungible with the traditional security. Concretely, the token must: be interchangeable with the conventional share; share the same CUSIP (Committee on Uniform Securities Identification Procedures) identifier; and confer on holders the same substantive rights and privileges as the traditional stock — including claims on corporate earnings, dividend rights, voting rights, and residual-asset distribution upon liquidation. If the tokenized form fails to grant rights equivalent to the original equity (e.g., no voting rights, no shareholder entitlements), or does not share the same CUSIP, the exchange will not deem it equivalent to the traditional security. Instead, it would be treated as a different product, such as a derivative or an American Depositary Receipt (ADR).

Precisely because of this high bar, most of today’s so-called “tokenized stocks” — for example, Robinhood “Stock Tokens,” Xstocks, etc. — do not meet the above criteria. At best they are price-linked shadow tokens that do not represent actual equity, and they typically do not carry voting rights; dividends are often reflected via reinvestment or cash-equivalent credits. Legally, investor claims often point to an SPV/issuing vehicle rather than the listed company itself. Most products are cash-redeemable, while direct “conversion back to the underlying shares” is constrained by custody and compliance limitations.

2. Unified Matching, Split Settlement: Trading and Post-Trade Mechanics

Equity 4, Rule 4757

Nasdaq plans to fully integrate tokenized and traditional securities at the trading layer. Under the proposal, once a tokenized share of a given stock satisfies the fungibility criteria described above, it will share the same order book as the traditional share and be matched under the same matching logic and priority rules. In other words, to the exchange’s matching engine, tokenized and non-tokenized orders are indistinguishable and receive equal treatment. Nasdaq explicitly stresses: “At the trading (execution) stage, there is no difference — the execution workflow is functionally identical.”

Equity 4, Rules 4756 & 4758

The divergence arises at settlement. Today, executed U.S. equity trades are cleared and settled through the Depository Trust Company (DTC). With a tokenized modality enabled, Nasdaq would give participants an additional token-form settlement option: When submitting an order, a broker may elect token settlement. If such an order executes and is flagged for token settlement, Nasdaq will forward the clearance instruction to DTC, which will then effect delivery-versus-payment on a blockchain in the background for that security transfer.

DTC would, pursuant to its own rules and systems (i.e., its in-development DLT settlement platform), complete the process of recording share ownership in on-chain token form. For end investors, the workflow remains transparent and seamless: trading is still matched on Nasdaq, while post-trade shifts from traditional electronic book-entry to blockchain registration, and the shares are ultimately held at an on-chain address in token form.

Notably, Nasdaq is not building a new market from scratch. Instead, it leverages existing market infrastructure and introduces blockchain as the back-end record-keeping layer without changing the front-end trading mechanics. As a result, traditional shares and tokenized shares have a single price at the trading stage, share market depth and liquidity, and are subject to identical transparency, risk controls, and market surveillance.

As Nasdaq states in the filing, the design aims to prevent fragmented liquidity — i.e., multiple versions of tokenized shares trading on different blockchains in isolation — and to ensure that the core mechanisms of the national market system (price discovery, best execution, etc.) remain intact. In doing so, it addresses long-standing pain points of “tokenized stocks”: multi-chain issuance (e.g., ETH/SOL), multi-venue trading (regulated exchanges vs. crypto exchanges/DEXs), and jurisdictional constraints, all of which scatter market-making capital and order books, leading to thin liquidity.

3. Trading-Hour Limits: No 24/7 Around-the-Clock Trading (for now)

Since launch, tokenized stocks have faced thin depth and high price-impact costs during U.S. equity off hours. This mismatch in trading windows has contributed to liquidity shortfalls and decoupling from reference prices. Many investors therefore ask whether tokenized equities can break free of U.S. market-hour constraints and offer 24/7 trading.

Nasdaq’s proposal gives a cautious answer: for the current phase, tokenized securities may trade only during existing market hours. The Exchange will not extend or bypass the trading schedule. Tokenized shares cannot trade outside the regular and extended sessions; they will follow U.S. equity convention and be tradable Monday–Friday (U.S. Eastern Time) during the regular session (9:30–16:00) and the pre-market/after-hours windows. Weekend and overnight trading are not supported.

4. Path to On-Chain Settlement

Behind Nasdaq’s tokenized-equity trading sits the core plumbing of traditional markets — the Depository Trust & Clearing Corporation (DTCC). Notably, DTCC has been exploring DLT-based settlement in recent years. Its Project Ion is a blockchain-enabled equity-settlement platform aimed at achieving T+0 and even real-time delivery-versus-payment. Public materials indicate that Project Ion went live in 2022 in a parallel pilot environment, processing 100,000+ equity-trade settlement instructions per day. DTCC developed the platform with enterprise blockchain provider R3, using R3 Corda to build a private, permissioned ledger — a non-public consortium network — as the underlying architecture.

It follows that Nasdaq’s tokenized trading is more likely to run on DTCC’s permissioned DLT rail than on public chains such as Ethereum. In this setup, DTCC can retain the legacy system as the authoritative record while operating the new DLT system in parallel to provide safety and redundancy. Practically speaking, under Nasdaq’s design the “on-chain” settlement would occur within a controlled consortium environment, with nodes operated by financial market infrastructure (FMI) providers such as DTCC (and its depository arm, DTC). This approach preserves transaction privacy, network reliability, and regulatory controllability, aligning with Wall Street’s high standards for trading and settlement systems.

A permissioned consortium ledger allows participants to be admitted via access controls, making data privacy and transaction throughput more governable and compliant with regulatory requirements. Accordingly, records of Nasdaq’s tokenized equities are not expected to appear on public blockchain explorers; rather, they would be maintained on a distributed ledger jointly operated by Nasdaq, DTC, and relevant custodial institutions.

Nasdaq has not specified in public filings how any smart contracts would be deployed. What is clear, however, is that Nasdaq does not intend to introduce a fully open token-trading environment. Instead, blockchain functions as a behind-the-scenes technology to improve efficiency, while front-end trading remains within a controlled framework. Practically, this means the book-entry is migrated to a blockchain record: investors would hold a regulator-recognized on-chain entry, not a freely circulating crypto token detached from the traditional market infrastructure.

Why is Nasdaq seeking approval for tokenized securities?

Blockchain has significant potential to improve the efficiency of financial market infrastructure. U.S. equities still settle on T+1 (and T+2 in some markets), whereas blockchain can enable near-real-time (T+0, even within seconds) settlement — shortening capital and securities hold times and reducing counterparty risk. In addition, a transparent, tamper-resistant distributed ledger provides a robust audit trail, reducing reconciliation needs and manual-processing errors. Nasdaq aims to introduce tokenized settlement to accelerate post-trade workflows while lowering clearing and custody costs. In essence, this is an attempt to modernize the securities-settlement mechanism from the ground up.

As Nasdaq notes in its filing: “Securities such as stocks have long evolved from paper certificates to electronic records; tokenization is simply another method of digitally representing assets.” By embracing blockchain, the Exchange signals its commitment to financial-technology innovation and to avoiding obsolescence amid the next technology wave. The asset-tokenization market is expected to surge, with some estimates projecting global tokenized-asset value to rise from about $2.1 trillion in 2024 to roughly $41.9 trillion by 2032 — a 45.8% compound annual growth rate (CAGR).

Conclusion: Long-Term Opportunities and Industry Outlook

Nasdaq’s push for trading in tokenized securities is unquestionably a major upgrade to the underlying technology of securities markets. It signals that traditional finance is taking a decisive step into the blockchain era. From regulatory approvals to technical readiness, this transition will not happen overnight. According to Nasdaq’s filing, the relevant blockchain settlement infrastructure may not be ready until late Q3 2026. Assuming SEC approval of the proposal and the launch of DTC’s distributed-ledger settlement system by then, U.S. investors could see the first securities trades settling in token form by the end of Q3 2026.

For investors, this should be viewed as a long-term theme. The GENIUS Act has opened a new chapter for compliant stablecoins, and Nasdaq’s tokenized-securities initiative may become the next game-changing milestone. Over the coming years, policy progress and technical milestones tied to this theme will repeatedly become market focal points and create tactical opportunities — for example across oracle infrastructure and RWA sectors. As Nasdaq’s leadership has emphasized, innovation should occur within the National Market System (NMS) to protect investors, rather than in the unregulated offshore wilds. As tokenized equities roll out on Nasdaq, they should unlock far greater scope for institutional capital to participate in on-chain equities.

For instance, large institutions could obtain genuine tokenized equities through official channels and confidently deploy them in DeFi to earn yield — capital that current shadow-token platforms struggle to attract. For everyday users, once a sovereign-grade exchange offers compliant stock tokens, there is little reason to hold “shadow” versions that do not confer shareholder rights.

While the outlook is promising, potential limitations must be acknowledged. In the initial phase, the direct benefits to retail investors may be limited. For U.S. retail today, trading equities via brokerages is already highly convenient; Nasdaq’s tokenization will not immediately and materially lower their costs or entry barriers. Likewise, the oft-cited benefit of 24/7 trading may not appeal to non-professional investors, who may not want equities to trade — and fluctuate — seven days a week without respite. Smart contracts also carry the risk of bugs and exploits; if a tokenized-equity contract fails, the ultimate allocation of liability remains unclear. In addition, several offshore, unregulated tokenized-stock venues have exhibited severe price dislocations, exposing thin liquidity and potential manipulation. Under Nasdaq’s design, such deviations should diminish, as tokens would be backed by real underlying shares and priced with participation from traditional market makers.

Nasdaq’s tokenized-equities trading would be a major milestone in the commercialization of blockchain technology. It signals that blockchain is no longer confined to the crypto niche but is entering the core workflows of mainstream finance. In industry terms, it represents an authoritative endorsement of blockchain and the broader Web3 ecosystem, encouraging more enterprises and developers to commit resources to the space. From a financial-history perspective, this event may be seen as a new phase of the securities market’s digital transformation — akin to the shift from paper certificates to electronic trading decades ago. For the Web3 community, it is a chance to translate ideals into practice: concepts such as decentralization and tokenization create the most value only when integrated with the real economy. This may not be the most utopian outcome for decentralization purists, but it substantially advances the large-scale adoption of blockchain.

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