Ondo Finance has urged the US Securities and Exchange Commission (SEC) to reconsider Nasdaq’s proposal for trading tokenized securities, stating that the plan lacks transparency and may create an unequal advantage for larger market players.

In a letter sent to the SEC, Ondo, a company specializing in blockchain technology and tokenized assets, expressed concern that without public disclosure regarding the processes of the Depository Trust Company (DTC) concerning blockchain settlements, the proposal cannot be properly assessed by regulators or investors. The DTC plays a pivotal role in the post-trade settlement of US securities.

Although Ondo acknowledges the potential of Nasdaq’s movement toward tokenization, they cautioned that the reference to undisclosed information suggests unequal access, preventing other entities from engaging with the proposal comprehensively.

Moreover, Ondo emphasized that Nasdaq’s new rule would not be applicable until the DTC’s system is finalized, advocating for a delay in decision-making until additional features are available. They called for the SEC to focus on “open collaboration and transparent standards” before reaching a conclusion.

Ondo Finance’s Letter and Nasdaq’s Proposal

Ondo’s correspondence is a response to Nasdaq’s filing from September 8, where the exchange sought to modify its regulations to facilitate trading in tokenized securities. Should it be approved, this would allow tokenized shares to trade alongside traditional stocks, with settlement processes managed through the DTC’s advanced system for tokenized assets.

Tokenized shares are digital representations of conventional stocks maintained on a blockchain.

This initiative by Nasdaq has initiated considerable discussions around the tokenization of its stocks, especially as various platforms have begun offering tokenized versions of US equities. For instance, Robinhood has launched a blockchain for trading tokenized US stocks tailored for its European users.

Impact on the Market

The recent push for tokenization caught the attention of several companies, including eToro and Kraken, which are also exploring opportunities in this domain. Kraken launched a platform for tokenized securities recently, catering to eligible clients in Europe.

Furthermore, experts suggest that this momentum may challenge the traditional liquidity available in stock markets, which could impact established players like the New York Stock Exchange.

Related Articles: Ondo’s $250M Catalyst fund indicates competitive growth in tokenized assets