Nasdaq CEO Reveals How Tokenization Could Unlock Billions in Capital

TLDR

• Nasdaq CEO Adena Friedman says tokenization could free up tens of billions of dollars in trapped capital
• Tokenization turns assets like stocks and bonds into digital tokens that move on blockchain networks
• DTCC plans to launch a platform this month letting firms tokenize stocks and ETFs
• The SEC issued an exemption allowing new trading venues to skip some traditional exchange rules
• Major firms like JPMorgan, Goldman Sachs, and BlackRock tested the new DTCC system this summer

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Financial firms are moving closer to a system where stocks and other assets trade as digital tokens. Nasdaq CEO Adena Friedman said this shift could unlock tens of billions of dollars currently tied up as collateral across the financial system.

JUST IN: Nasdaq CEO predicts blockchain-based tokenization will transform global finance, unleashing tens of billions of dollars in capital.

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Friedman spoke at the TOKEN2049 conference in Singapore this week. She said turning assets like Treasurys, equities, and money market funds into tokens would make collateral move more freely between institutions.

“If you tokenize all those instruments along with the flow of money, then the collateral becomes very fluid,” Friedman said.

What Is Tokenization

Tokenization means representing a financial asset, such as a stock or bond, as a digital token on a blockchain. The token can be transferred instantly instead of going through the usual chain of brokers and clearinghouses.

Friedman pointed to the Genius Act, a U.S. law that created rules for stablecoins, as a reason institutional interest has grown over the past year. Stablecoins are tokens tied to the value of the dollar.

She said retail investors have wanted round-the-clock trading for years. “The retail ecosystem has been about 10 years ahead,” Friedman said.

Moving to a full 24/7 market would require big changes. Banks currently pause trading to update systems and manage risk, but nonstop markets need those tasks done in real time.

Friedman said artificial intelligence will play a role in that shift. Nasdaq has already launched AI tools within its risk platform that give recommendations to staff.

Kraken co-CEO Arjun Sethi said companies outside the U.S. are looking at tokenization too. He mentioned a company with about $25 million in revenue exploring access to American capital markets through this method.

Regulators and Wall Street Firms Are Moving Fast

The Depository Trust & Clearing Corp, known as DTCC, plans to launch a new platform this month. It will let customers tokenize stocks, exchange traded funds, and other securities.

Dozens of large institutions tested the system in a one day trial this summer. These included JPMorgan Chase, Goldman Sachs, BlackRock, and the New York Stock Exchange.

Nadine Chakar, global head of DTCC Digital Assets, said the trial marked a change from years of small pilot programs. “Honestly, for the past 10 years we’ve had innovation by press release,” she said.

Nasdaq estimates large financial institutions could earn up to $340 million a year in extra interest by freeing up collateral. The company also plans to launch Nasdaq Equity Tokens representing shares of public companies next year.

The Securities and Exchange Commission issued an exemption allowing new trading venues to operate without some rules that traditional exchanges must follow. SEC Chairman Paul Atkins said the goal is to let the market evolve while regulators learn from it.

One benefit for everyday investors would be faster brokerage switching. Today, moving accounts between brokerages can take days through a system called ACATS.

Not everyone supports the change. Mark Hays of Americans for Financial Reform said faster trading could make markets more prone to sudden crashes if proper safeguards are not in place.

Robinhood and Coinbase already offer tokenized stock products to investors outside the U.S. Both companies have said they want to expand these offerings to U.S. investors as rules become clearer.

Citigroup researchers estimated in June that the tokenized asset market could reach $5.5 trillion by 2030. That would be up from about $17 billion today.