Nasdaq Inc. is ramping up its efforts to persuade the U.S. Securities and Exchange Commission (SEC) to greenlight the launch of tokenized stocks—a move that could transform financial markets but has sparked strong opposition from established exchanges. The World Federation of Exchanges (WFE), which counts both Nasdaq and Germany’s Deutsche Boerse among its members, recently cautioned that granting regulatory leeway to crypto platforms could undermine market stability and weaken investor safeguards.
WFE CEO Nandini Sukumar stressed that the SEC should not allow new entrants to sidestep the long-standing rules that have protected markets for decades. The core of the discussion revolves around tokenized equities, which are digital tokens on a blockchain that represent ownership of traditional stocks. Supporters believe this technology could make trading more efficient and broaden participation, but skeptics—including James Auliffe, who leads the WFE’s technology group—argue that current equity markets already operate with high efficiency, and that the costs of adopting blockchain may outweigh any potential gains.
This debate highlights the ongoing struggle between fostering innovation and maintaining regulatory oversight. While crypto companies aim to capitalize on the benefits of blockchain, established exchanges are advocating for fair competition to ensure that compliance standards are not eroded by less regulated platforms.
Nasdaq’s push for tokenized assets is part of a broader initiative to strengthen its role in financial infrastructure. The company has recently deepened its collaboration with fintech firm Revolut, utilizing its AxiomSL platform to streamline regulatory reporting throughout Europe. According to Murray Laister, Revolut’s head of group regulatory reporting, this partnership provides a scalable compliance solution that supports growth without sacrificing regulatory rigor. This approach reflects Nasdaq’s commitment to balancing technological advancement with adherence to regulatory requirements, especially as it seeks SEC approval for tokenized offerings.
Under the leadership of President Donald Trump, the SEC has adopted a more favorable stance toward cryptocurrencies, potentially paving the way for tokenization. Nevertheless, the agency faces the challenge of encouraging innovation while upholding investor protections. The WFE’s recent letter, though not naming specific crypto companies, reflects growing concern among traditional financial players as digital asset platforms gain ground in conventional markets. Auliffe reiterated that, given the efficiency of current equity markets, there are limited circumstances where blockchain’s advantages would justify the transition.
Nasdaq’s share performance has been mixed, mirroring investor uncertainty. Although its price-to-earnings ratio of 31.84 is higher than the industry average of 24.4, the stock has underperformed in the short term. This volatility underscores the difficulties of navigating regulatory ambiguity while meeting market expectations, especially as interest in tokenization increases.
Regulators worldwide are not aligned on the issue. The International Organization of Securities Commissions has warned that tokenized assets bring new risks not addressed by current regulations, such as ambiguous ownership rights and increased counterparty risk. These warnings echo the WFE’s concerns and point to a fragmented regulatory environment. The Financial Stability Board (FSB) has called for unified global standards to address potential systemic threats posed by tokenized markets.
As the SEC deliberates, its decision could have far-reaching consequences for the structure of capital markets. If tokenized stocks receive approval, they could enable faster settlements and round-the-clock trading, but might also complicate regulatory oversight and further intertwine traditional finance with the crypto sector. For now, the ongoing debate serves as a test of whether technological progress can be reconciled with the core values of market integrity.