Ondo Finance’s Appeal to the SEC
Ondo Finance, a company specializing in the intersection of blockchain and traditional finance, has reached out to the Securities and Exchange Commission (SEC) requesting a pause on Nasdaq’s recent initiative aimed at tokenizing securities. This appeal stems from concerns that without adequate public information regarding the Depository Trust Company’s (DTC) management of blockchain settlements, both regulators and investors are at a disadvantage in assessing the initiative.
While Ondo acknowledges the potential benefits of Nasdaq’s efforts to innovate financial markets, they stress the importance of a transparent and inclusive process. In a communication directed to the SEC, Ondo emphasized that the current reliance of Nasdaq on undisclosed information might lead to unequal access, hindering the ability of other firms to provide input on the matter.
Concerns Over Nasdaq’s Proposed Rule
The letter also pointed out that Nasdaq’s proposed rule hinges on the DTC’s completion of its new blockchain settlement system, suggesting there is no immediate benefit to rushing approval when further information is necessary. Ondo advocates for the SEC to focus on implementing open standards that ensure all market players are treated equitably.
Recent Developments in Tokenized Securities
On September 8, Nasdaq submitted its proposal to enable the trading of tokenized securities alongside conventional stocks, with the intention of using the DTC’s forthcoming blockchain platform for settlement. The SEC began its review period on September 22, which spans 45 days and may be extended into December.
As the competition in the realm of tokenized securities intensifies, notable developments have emerged. For instance, Robinhood launched a Layer-2 blockchain on June 30 aimed at facilitating the trading of tokenized U.S. stocks and ETFs for users in Europe. They announced plans to offer access to over 200 U.S. securities as on-chain tokens. Similarly, eToro has disclosed intentions to introduce tokenized stocks as ERC-20 tokens on the Ethereum network, targeting 100 well-known U.S. stocks and ETFs for trading during the week. Kraken has also joined the movement, unveiling its own tokenized securities platform as of September for its European clientele.
The Future of Traditional Exchanges
In a broader context, Galaxy Digital has sounded the alarm that the rise of tokenization could pose a substantial threat to traditional exchanges such as the New York Stock Exchange, potentially diverting liquidity toward blockchain-centric trading platforms. The SEC’s forthcoming decision on Nasdaq’s proposal will serve as a pivotal moment, reflecting the pace of modernization within conventional financial markets.
