The US SEC has reportedly started developing a plan to allow stocks to trade like Crypto on the blockchain, treating company shares as digital tokens.
This means that the stocks for companies such as Apple, Tesla, and Nvidia will operate like cryptocurrencies. The initiative gains support from crypto firms and fintechs, hey it faces pushback from traditional institutions that profit from the existing market structure. According to the press release, the SEC is consulting with market participants on regulatory changes that would make the tokenised securities possible.
Pushback from traditional financial institutions
Nasdaq already submitted a rule change filing to permit listed equities and ETPs to trade in tokenised form, with the SEC’s public-comment period ending on October 14. If approved and implemented, the initiative would have US markets recognise blockchain-based stock trading. Crypto platforms, like Robinhood and Coinbase, are supporting the initiative, viewing tokenisation as an opportunity to expand their offering and offer broader access to equities for investors. The SEC mentioned that it is ready to work with firms looking to tokenise traditional assets.
This aligns with Nasdaq’s recent submission to the SEC, which states that tokenised shares should carry the same rights and protections as their underlying securities. The exchange requested that the assets be clearly labelled so that clearing firms and the DTC could process orders the same way they do with conventional stocks.
However, Wall Street banks and clearinghouses argue that tokenised assets threaten their role in the settlement and trading process. Recently, the group of stock exchanges, the World Federation of Exchanges (WFE), addressed a letter to the regulator and the ESMA that asked for more oversight on tokenised stocks. According to Reuters, the letter raised concerns about blockchain-based stocks, claiming that these products mimic equities without offering shareholder rights or market trading safeguards.
Financial players like BlackRock, Franklin Templeton, and KKR have begun experimenting with tokenising parts of their funds. Yet, most tokenised shares are still issued by third parties, not the companies themselves, raising legal and regulatory hurdles.
