The US Securities and Exchange Commission (SEC) is reportedly developing a plan to allow blockchain-registered versions of stocks to trade on cryptocurrency exchanges — a move that would mark a significant step toward integrating digital asset technology into the traditional financial system.

The proposal, still in early stages, would let investors buy and sell stock tokens — digital representations of shares in publicly traded companies — on approved crypto platforms, The Information reported Tuesday, citing people familiar with the matter.

The initiative reflects growing regulatory openness to tokenization, the process of creating blockchain-based tokens that mirror ownership of traditional assets. 

SEC Chair Paul Atkins recently described tokenization as an “innovation” the agency should seek to advance, not restrict. Regulators “should be focused on how do we advance innovation in the marketplace,” he said, noting that tokenized assets could improve access to financial markets and reduce costs.

Interest in stock tokenization has accelerated in recent months. Platforms such as Robinhood and Kraken have begun offering tokenized stock products. At the same time, Nasdaq has requested SEC approval for a rule change that would allow it to list tokenized securities on its exchange.

Crypto exchange Coinbase is also reportedly seeking SEC approval to offer tokenized equities.

Still, the SEC’s apparent willingness to embrace blockchain-based equities has drawn pushback from traditional finance companies. In a July note to the agency’s Crypto Task Force, Citadel Securities cautioned regulators to ensure that tokenization delivers genuine market benefits rather than exploiting regulatory gaps.

“Tokenized securities must achieve success by delivering real innovation and efficiency to market participants, rather than through self-serving regulatory arbitrage,” Citadel wrote.

Magazine: Can Robinhood or Kraken’s tokenized stocks ever be truly decentralized?

Stock tokenization gains ground

Tokenized stocks are emerging as one of the next major growth areas within the broader tokenization market. While early financial tokenization efforts have focused largely on private credit and US Treasury bonds, stocks are beginning to catch up.

According to industry data, more than $31 billion in assets have been tokenized, but tokenized equities currently account for only about 2% of that total. Still, their value has nearly doubled over the past 100 days, signaling accelerating adoption.

A recent Binance Research report compared the rise of tokenized stocks to the early days of the DeFi boom in 2020 and 2021. Researchers suggested that, following recent growth, tokenized equities “may be nearing a major inflection point in the broader transition to hybrid finance.”

Binance Research estimates the market for tokenized stocks could exceed $1.3 trillion if just 1% of global equities move onto the blockchain.

Magazine: Robinhood’s tokenized stocks have stirred up a legal hornet’s nest