Ondo Finance has urged the United States Securities and Exchange Commission (SEC) to delay or reject Nasdaq’s proposal to trade tokenized securities, saying it lacks transparency and could give an unfair advantage to established market participants.
In a Wednesday letter To the regulator, Ondo – a blockchain company that issues tokenized versions of traditional assets – said regulators and investors cannot fairly evaluate Nasdaq’s proposal without public details on how the Depository Trust Company (DTC) will manage blockchain settlements. DTC serves as the primary depository for U.S. securities and facilitates their post-trade settlement.
While acknowledging support for Nasdaq’s move toward tokenization, Ondo warned that “Nasdaq’s reference to non-public information implies differential access that deprives other companies of a fair opportunity to comment.”
The company also noted that the Nasdaq rule cannot go into effect until DTC finalizes its system, saying there is no harm in delaying approval until more features are released. He called on the SEC to prioritize “open collaboration and transparent standards” before making a final decision.
Ondo’s letter responds to that of Nasdaq of September 8 deposit with the SEC, in which the world’s second largest stock exchange sought to change its rules to allow trading of tokenized securities.
Tokenized stocks are digital versions of traditional stocks recorded on a blockchain.
If approved, the proposal would allow tokenized stocks to trade alongside traditional stocks, with settlements processed through DTC’s upcoming system for tokenized securities.
Nasdaq’s proposal was published in the Federal Register on September 22, beginning the SEC’s 45-day review period, which extends to early November or late December if extended.
Related: $250M Ondo Catalyst Fund Signals “Arms Race” for RWA Tokenization
The surge in tokenized stocks
The ongoing debate over the tokenization of Nasdaq stocks is taking place as several platforms have already listed or are considering listing tokenized versions of U.S. stocks.
On June 30, Robinhood launched a layer 2 blockchain to support trading. tokenized US stocks and ETFs for European users. The platform announced that it will list over 200 US stocks and funds as on-chain tokens.
Trading platform eToro also announced plans to launch shares tokenized in the form of ERC-20 tokens on Ethereum. The company said the rollout will include 100 popular US-listed stocks and ETFs, available for trading 24/5.
Kraken is also following the trend. The crypto exchange launched a tokenized securities platform in September, making tokenized shares available to eligible customers in Europe.
Galaxy Digital warned that the current tokenization push could threaten the dominance of the New York Stock Exchangesaying in July that this called into question the liquidity of traditional markets.
Review: Robinhood’s token actions have stirred up a legal hornet’s nest
