Nasdaq Proposes SEC Rule Changes for Tokenized Equity Trading → Regulation

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Briefing

Nasdaq Stock Market LLC has submitted a Form 19b-4 to the U.S. Securities and Exchange Commission (SEC), proposing rule amendments to facilitate the trading of tokenized equity securities and exchange-traded products (ETPs) on its platform. This action aims to integrate blockchain-based assets into the national market system by modifying the definition of “Security” to encompass both traditional and tokenized forms. The proposal mandates that tokenized securities maintain fungibility with their traditional counterparts, share the same CUSIP number, and confer identical material rights and privileges to shareholders, ensuring regulatory consistency and investor protection.

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Context

Before this proposal, the regulatory framework for digital assets in the U.S. has grappled with the classification and trading of blockchain-based instruments within existing securities laws. The prevailing challenge centered on how to accommodate novel technological representations of ownership without creating a parallel, unregulated market structure. Firms faced uncertainty regarding the operationalization of digital assets under established rules, leading to fragmented liquidity and a cautious approach to integrating these innovations into mainstream financial markets.

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Analysis

This proposal directly impacts existing compliance frameworks by requiring regulated entities to adapt their operational systems for tokenized securities. It necessitates a review of how trading, clearing, and settlement processes will accommodate blockchain technology while adhering to established standards for fungibility and shareholder rights. For market participants, the integration of tokenized assets into the Nasdaq Market Center means that order entry and execution will occur under the same rules as traditional securities, with a designated flag for tokenized settlement. This development signals a strategic move towards a unified market structure where technological innovation is operationalized within, rather than outside of, the established regulatory architecture.

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Parameters

Regulatory Authority → U.S. Securities and Exchange Commission (SEC)
Proposing Entity → The Nasdaq Stock Market LLC
Legal Instrument → Form 19b-4 (SR-NASDAQ-2025-072)
Proposed Action → Amend rules to allow trading of tokenized equity securities and ETPs
Key Requirement → Tokenized securities must be fungible, share CUSIP, and have identical rights as traditional shares
Filing Date → September 8, 2025

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Outlook

The SEC has published Nasdaq’s proposal for public comment, initiating the next phase of the regulatory process. The outcome of this review will likely set a significant precedent for how other national exchanges in the U.S. approach the tokenization of traditional financial assets. This action could accelerate the convergence of traditional finance and blockchain technology, potentially fostering innovation in asset issuance and trading while demanding robust integration with existing post-trade infrastructure like the Depository Trust Company (DTC). Future developments may include further clarity on digital wallet integration and the evolution of settlement protocols.

This Nasdaq proposal represents a foundational step toward formalizing the integration of blockchain-based securities into the mainstream U.S. financial markets, establishing a critical pathway for institutional adoption and systemic maturation.

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