By John Gray
Nasdaq has submitted a filing with the SEC to support the trading of tokenised securities. What does this mean for the future of DeFi?
Back in November 2022, Nasdaq.com ran an article titled ‘Decentralised Finance is the Future’. “Exciting times are ahead,” wrote the author, Merav Ozair. “In the foreseeable future, financial and economic services will run on Distributed Ledger Technology (DLT) – a decentralised database managed by multiple participants, with no central administrator.” Within 15 years, Ozair estimated, “DLT will be the ‘rails’ of all financial products and services.”[1] What’s more, “DeFi will play an integral and instrumental role in the evolution of the metaverse.” Ah, those heady, post-pandemic days, when the metaverse was the next big thing, and AI was still science fiction!
In any case, it is notable that Nasdaq was prepared, at a relatively early stage, to give airtime to the idea that DeFi might prove genuinely transformative. Of course, this early enthusiasm around DeFi’s potential was tempered by the major unwind that was already in the offing when Ozair’s article went live. High-profile failures — most notably the collapse of Terra’s algorithmic stablecoin and the bankruptcy of centralised intermediaries like FTX — triggered a sharp contraction in activity, liquidity and valuations. Total value locked fell by more than two-thirds from its peak.
But the reset was not purely destructive. Surviving protocols simplified token economics and prioritised security and transparency. By the end of 2023, DeFi had re-emerged smaller and more realistic about its limits. We could say that, post-reset, DeFi feels less utopian and more institutional. It is increasingly seen as a tool, or an infrastructural toolkit, more than a parallel financial system.
This is the context in which Nasdaq seems to at last be taking DeFi seriously – and not just by publishing editorials from aspiring thought leaders.
How does Nasdaq want to integrate DeFi?
In September last year, Nasdaq submitted a filing with the US Securities and Exchange Commission (SEC) seeking approval to support the trading of tokenised securities.
Under the proposed changes, member firms and investors would be able to trade tokenised versions of equities and exchange-traded products (ETPs) directly on the exchange’s markets. According to Chuck Mack, Nasdaq’s Senior Vice President of North American Markets, the goal “is to integrate digital assets into Nasdaq’s current infrastructure and systems, which will advance financial innovation while maintaining stability, fairness, and investor protection.”[2]
The filing sets out a streamlined model for trading tokenised securities within existing regulatory structures. A security listed on Nasdaq could be traded in either tokenised or conventional form, without altering the trading process itself.
This is key: unlike existing platforms, which create separate tokenised versions of stocks, Nasdaq’s proposal would let investors buy shares with either traditional or tokenised settlement. The tokenised shares would carry the same rights as ordinary shares.
At the point of order entry, participants would also choose whether the transaction is cleared and settled in tokenised or traditional form. Nasdaq would relay those instructions to the Depository Trust Corporation (DTC). Tokenised and non-tokenised shares would be fully fungible: they would trade under the same order entry and execution rules, and share the same CUSIP identification number. Thus, in effect, tokenisation would change the settlement mechanics rather than the security's legal or economic character.
Nasdaq is targeting a Q3 2026 launch, should approval be granted.
Why now?
In the words of Chuck Mack, “Blockchain technology can provide a number of potential efficiencies, including faster settlements, improved audit trails, and a more streamlined flow from order to trade to settlement. Additionally, once an equity asset is on a blockchain, it has the potential to be used in new ways.
“All of this potential means there’s excitement around this technology, and we’re hearing from the market that there is demand for a way to trade tokenised securities. We want to be a part of the solution, helping markets evolve to continue to meet investor needs and making sure it’s done right.”
In short, DeFi is at a tipping point. Customers are asking for it, and the technology has reached a point where Nasdaq judges there is no risk – reputational or otherwise – in integrating it. In fact, reading between the lines, the real risk is to not integrate DeFi in some way and end up becoming irrelevant.
What’s been the reaction?
The move has been called a watershed. If the SEC approves the proposal, it will mark the first time tokenised securities are listed on a major US exchange. It will also open broad access to retail investors and, in theory, offer greater legitimacy and regulatory assurance than smaller platforms can provide.
Still, there are a number of uncertainties. Straight out of the gate, it raises regulatory questions. How the SEC will approve the trading of tokenised equities and ETPs remains unclear, and Nasdaq must demonstrate it can maintain compliance with securities laws. State-level regulators could layer on additional scrutiny, complicating the legal landscape.
Market structure and risk is another concern. Decentralised trading could fragment liquidity, complicate price discovery, and introduce new vectors for manipulation. Settlement and clearing processes will need to function across both traditional and blockchain systems, with Nasdaq proving it can monitor and enforce trades effectively.
Technology and adoption risks are another issue. Smart contracts and DeFi protocols are vulnerable to cybersecurity threats, and even minor outages could disrupt trading. Institutional investors may be cautious, leaving retail-heavy markets exposed to volatility. Presumably, Nasdaq’s backrooms are abuzz with teams devising solutions for these and other issues. If the SEC is on board with the general idea, it will likely provide input on the specifics. Still, the path to fully integrating DeFi into Nasdaq’s markets will be messy and iterative. Progress will be closely watched by both regulators and investors.
Will other major exchanges follow suit?
They already are.
In February this year, the NYSE announced plans to launch a tokenised stock trading platform as early as Q2. Recent SEC guidance will allow tokenised versions of Russell 1000 stocks, major ETFs, and other issuers’ shares. The platform will operate 24/7 with instant settlement, keeping tokenised and traditional shares interchangeable to avoid market fragmentation. Trades will use the NYSE’s existing systems, while blockchain reporting adds transparency and reduces some risks associated with public blockchain trading. To support limited early liquidity, the exchange will offer both a standard order book and a request-for-quote functionality, allowing retail investors to interact with institutional liquidity providers.
The plans are broadly aligned: both Nasdaq and NYSE aim to let investors trade tokenised shares with full shareholder rights, 24/7 access, and regulated oversight. The main differences are technical nuances, like custody setups or matching engines, but the core idea — tokenised stocks as mainstream market infrastructure — is the same. NYSE’s announcement feels partly reactive: it can’t risk ceding the innovation narrative to Nasdaq, especially as both exchanges compete for tech-savvy retail and institutional investors. Other major exchanges are likewise taking steps towards tokenisation of equities. LSEG, for instance, in January launched its Digital Settlement House (DiSH), providing 24/7 settlement of tokenised commercial bank deposits across multiple currencies and networks. A lot will be riding on Nasdaq’s and NYSE’s forays into the tokenisation of equities.
If it goes well, it will represent a successful hybridisation, giving rise to an entirely new vision of what finance could look like. If it goes badly, it will be just another case of a legacy incumbent trying to remain relevant in a world which no longer needs it. DeFi is the future, but will Nasdaq be around to see it?
[1] https://www.nasdaq.com/articles/decentralized-finance-defi-is-the-future
[2] https://www.nasdaq.com/newsroom/qa-nasdaqs-new-proposal-tokenized-securities
