Nasdaq to Tokenize Stocks by 2026: How Tokenized Shares Could Transform Markets

The Evolution of Capital Markets: Why Stock Tokenization Matters Now

What if the infrastructure powering global financial markets could be fundamentally reimagined—not through disruption, but through thoughtful integration of proven technology? This question sits at the heart of Nasdaq's strategic push to bring stock tokenization into the regulated U.S. securities ecosystem, a move that signals a pivotal shift in how institutional and retail investors will interact with capital markets.[1][2]

The Convergence of Traditional Finance and Digital Innovation

For decades, the securities industry has operated within carefully constructed regulatory frameworks designed to protect investors while enabling efficient capital formation. Yet these systems were built for a different era—one where settlement took days, fractional ownership required complex intermediaries, and trading stopped when the closing bell rang. Today, Nasdaq is proposing something more evolutionary than revolutionary: the ability to trade and settle securities using blockchain technology while maintaining the full protections and transparency that define the U.S. national market system.[1][2]

The distinction matters profoundly. Rather than creating parallel markets or offshore venues that operate outside regulatory oversight, Nasdaq's approach embeds tokenized stocks directly within existing market infrastructure. Investors would have the choice to settle trades in either traditional form or tokenized form on a trade-by-trade basis, with both versions remaining fungible—sharing the same CUSIP, ticker symbol, and order book priority.[1][2] This is integration, not replacement.

Why This Moment, Why This Matters

The regulatory landscape shifted decisively in September 2025 when the SEC and CFTC issued a joint staff statement affirming that regulated U.S. exchanges may facilitate trading in certain spot crypto commodity products.[1] This clarity, combined with legislative momentum around the Responsible Financial Innovation Act of 2025, created the conditions for Nasdaq's September 8, 2025 rule filing (SR-NASDAQ-2025-072) seeking approval to trade tokenized U.S. stocks and ETFs alongside traditional shares.[1][2]

But why should business leaders care about this technical capability? The answer lies in understanding what tokenization enables at a deeper level: capital efficiency, operational transparency, and market democratization.

The Business Case: Beyond Efficiency Gains

When Matt Savarese, Nasdaq's head of digital assets strategy, speaks about tokenization, he emphasizes that this initiative represents evolution within established guardrails, not a departure from them.[1] Yet the implications for your organization are substantial.

Collateral mobility and programmable corporate actions represent perhaps the most transformative opportunity. Tokenized shares recorded on blockchain infrastructure could enable faster settlement cycles, reduce post-trade processing friction, and unlock new possibilities for borrowing, lending, and collateralized trading arrangements. Imagine institutional investors being able to deploy capital more efficiently across multiple strategies simultaneously, with near-instantaneous settlement and enhanced auditability replacing the T+1 settlement standard.[1]

Fractional ownership becomes genuinely accessible. Rather than requiring complex fund structures or intermediaries to enable retail participation in high-value securities, tokenization allows investors to hold precise fractional positions. This democratization of capital markets access could reshape how wealth is built and deployed across investor segments.[1]

The 24/7 trading capability—inspired by the always-on nature of crypto markets—addresses a fundamental inefficiency in traditional markets. Global capital doesn't sleep, yet U.S. securities markets operate within defined business hours. Tokenized settlement infrastructure could eventually enable continuous trading, allowing investors to respond to global events and opportunities without artificial temporal constraints.[1]

The Regulatory Framework: Investor Protection Meets Innovation

A critical insight embedded in Nasdaq's proposal deserves emphasis: wholesale exemptions from the national market system are neither necessary nor desirable.[2] This positioning reveals sophisticated thinking about how to achieve innovation without sacrificing the investor protections that have defined U.S. capital markets for generations.

Tokenized securities would carry full shareholder rights—voting, dividends, liquidation preferences—identical to their traditional equivalents.[1] They would remain subject to the same disclosure obligations, surveillance requirements, and regulatory oversight as conventional securities.[2] The innovation lies not in circumventing regulation, but in upgrading the infrastructure through which regulation operates.

For compliance professionals, this means expanding surveillance and oversight capabilities to monitor activity across both traditional and digital venues, ensuring that market manipulation, insider trading, and conflicts of interest are detected with equal rigor regardless of settlement method.[1] The shift toward 24/7 markets also necessitates always-on monitoring infrastructure—a significant operational evolution from historically business-hours-aligned compliance functions.

Organizations looking to understand these evolving compliance requirements can benefit from comprehensive compliance frameworks that address the intersection of traditional regulatory oversight and emerging digital asset technologies.

The Timeline and Implementation Reality

Nasdaq envisions the first token-settled trades going live as early as Q3 2026, contingent on SEC approval and completion of blockchain-based infrastructure by the Depository Trust Company (DTC).[1] This timeline reflects both ambition and realism—sufficient urgency to capitalize on regulatory momentum, yet grounded in the practical requirements of building settlement systems that must operate flawlessly at scale.

The proposal positions Nasdaq as a leader in bringing blockchain technology to the core of the financial system, contrasting sharply with offshore platforms offering synthetic tokenized equities without full shareholder rights.[1] This distinction matters: Nasdaq is not pursuing tokenization as a speculative venture, but as a fundamental upgrade to market infrastructure that preserves institutional confidence while enabling new capabilities.

For organizations preparing for this transition, robust internal controls frameworks become essential for managing the operational complexity of hybrid traditional-digital trading environments.

Strategic Implications for Market Participants

For institutional investors, asset managers, and financial services firms, tokenization represents both opportunity and obligation. Organizations that proactively adapt their infrastructure—from custody arrangements to reporting systems to employee trading policies—will be positioned to capitalize on enhanced capital efficiency and operational transparency. Those that delay risk competitive disadvantage as liquidity and innovation migrate toward platforms offering tokenized settlement options.

The convergence of traditional finance and decentralized finance principles, as Savarese emphasizes, creates genuine potential to improve capital efficiency through the combination of risk management, compliance, regulation, and programmable blockchain technology.[1] This is not ideological rhetoric; it reflects practical recognition that legacy systems and digital innovation can reinforce rather than contradict one another.

Financial services organizations can explore Zoho Projects for managing complex implementation timelines and cross-functional coordination required for tokenization readiness initiatives.

The Broader Transformation

What Nasdaq is proposing transcends a single product feature. It represents a fundamental reimagining of how securities markets can operate in an era where technology enables transparency, speed, and efficiency that previous generations would have considered impossible. By maintaining rigorous regulatory oversight while embracing technological capability, Nasdaq is demonstrating that innovation and investor protection are not opposing forces—they are complementary imperatives.

The question for your organization is not whether tokenization will eventually become mainstream in capital markets. The regulatory clarity, legislative momentum, and technological readiness all point toward inevitable adoption. The question is whether you will lead that transition or respond to it after others have already moved.[1][2]

Organizations seeking to understand how intelligent automation frameworks can support the operational complexity of tokenized trading environments will find that early preparation creates competitive advantage in an evolving marketplace.

What is "stock tokenization" as Nasdaq is proposing?

Stock tokenization records ownership of U.S. securities on blockchain-based infrastructure so those securities can be traded and settled in token form. Nasdaq's proposal embeds tokenized shares into the regulated U.S. market structure—preserving existing protections while enabling blockchain-native settlement and programmability.

How does Nasdaq's approach differ from offshore or "synthetic" tokenized equities?

Nasdaq seeks integration with the national market system rather than creating parallel, unregulated venues. Tokenized and traditional shares would be fungible—sharing the same CUSIP, ticker, and order-book priority—while remaining subject to the same U.S. disclosure, surveillance, and regulatory regimes. That contrasts with offshore synthetic tokens that may lack full shareholder rights or regulatory oversight.

Will tokenized shares have the same shareholder rights as regular shares?

Yes. Under Nasdaq's proposal, tokenized securities would carry full shareholder rights—voting, dividends, and liquidation preferences—identical to their traditional equivalents and remain subject to the same disclosure obligations and oversight.

How will tokenized and traditional shares coexist in trading and settlement?

Trades could be settled either in traditional form or tokenized form on a trade-by-trade basis. Both forms would remain fungible on the same order book, preserving priority and market integrity while giving participants a choice of settlement method. This flexibility enables enhanced operational efficiency without disrupting existing market structures.

What are the primary benefits of tokenizing stocks?

Key benefits include faster settlement and capital efficiency, improved collateral mobility and programmable corporate actions, genuine fractional ownership for retail access, enhanced auditability and transparency from blockchain records, and the potential to enable more continuous (24/7) trading. These advantages align with broader digital transformation trends reshaping financial markets.

Does tokenization change investor protection or regulatory oversight?

No—Nasdaq's design emphasizes maintaining investor protections. Tokenized securities would remain subject to U.S. disclosure rules, surveillance, and regulatory oversight. The proposal explicitly avoids wholesale exemptions from the national market system, prioritizing regulated integration over avoidance of rules while implementing robust compliance frameworks.

What operational and compliance changes should firms expect?

Firms will need to adapt custody arrangements, reporting systems, reconciliation processes, employee trading policies, and surveillance tools. Always-on monitoring and cross-venue surveillance capability are likely required to detect manipulation or insider trading across both tokenized and traditional venues. Robust internal controls and project coordination are essential for readiness.

What is the timeline for implementing tokenized stock trading?

Nasdaq filed SR-NASDAQ-2025-072 on September 8, 2025. The proposal envisions the first token-settled trades as early as Q3 2026, but that timing is contingent on SEC approval and the Depository Trust Company (DTC) completing the required blockchain-based settlement infrastructure.

What role does the DTC play in this transition?

The DTC must build out blockchain-based settlement infrastructure to support tokenized securities. Completion of that infrastructure is a prerequisite for token-settled trades in Nasdaq's envisioned timeline. This represents a significant digital transformation initiative for the financial infrastructure ecosystem.

Will tokenization immediately enable 24/7 trading of U.S. securities?

Tokenized settlement infrastructure can enable continuous trading in principle, but widespread 24/7 trading depends on regulatory decisions, market structure changes, and operational readiness. Nasdaq's proposal highlights the possibility rather than an immediate switch to always-on markets, requiring careful consideration of automation capabilities and risk management protocols.

How might tokenization affect liquidity and market fragmentation?

If integrated into the national market system as proposed, tokenization can concentrate liquidity rather than fragment it. However, proliferation of unregulated offshore tokens could fragment liquidity and reduce transparency—one reason Nasdaq emphasizes regulated integration to preserve market quality.

What are the main risks and enforcement challenges?

Risks include cross-venue market manipulation, insider trading in always-on markets, operational and custody failures, and gaps in surveillance when trading spans traditional and tokenized venues. Regulators and firms will need enhanced, continuous oversight and robust reconciliation protocols to mitigate these risks.

What practical steps should market participants take now to prepare?

Begin by assessing custody and settlement processes, upgrading surveillance and reporting systems, updating internal controls and employee-trading policies, and allocating project resources to integration efforts. Cross-functional planning (legal, compliance, operations, tech) and pilot testing will reduce implementation risk. Consider leveraging Zoho Flow for workflow automation and Zoho People for managing organizational change.

How will retail investors be affected?

Retail investors stand to gain greater access through true fractional ownership and potentially extended trading hours, while retaining statutory protections because tokenized shares would carry the same rights and disclosure requirements as traditional shares under Nasdaq's proposed framework.

Are ETFs included in Nasdaq's tokenization plans?

Yes. Nasdaq's September 8, 2025 filing sought approval to trade tokenized U.S. stocks and ETFs alongside traditional shares, indicating ETFs are part of the proposed tokenization scope. This expansion could significantly enhance market efficiency and accessibility for diverse investment products.