The SEC has set the tone for stock tokenization this week, and Apple stock may welcome a new era of on-chain trading.

The U.S. Securities and Exchange Commission (SEC) Investor Advisory Committee will hold a key meeting on December 4 to publicly discuss the practical operation of stock tokenization under the existing regulatory framework for the first time. The meeting will gather experts from institutions such as Nasdaq, BlackRock, and Coinbase, aiming to clarify the issuance, trading, and settlement mechanisms of tokenized stocks while ensuring that investor protection is not compromised. Nasdaq's proposal indicates that tokenized stocks could share the same order book and regulatory rules as traditional stocks, with real trading potentially starting as early as the third quarter of next year, a move that could reshape the global equity market infrastructure.

Regulatory Watershed: SEC Faces the Real Challenges of Stock Tokenization

The U.S. Securities and Exchange Commission's Investor Advisory Committee is scheduled to hold a thematic discussion on December 4, marking the regulatory agency's first systematic review of the feasibility of stock tokenization under the existing legal framework. This two-hour meeting is explicitly themed “Stock Tokenization: How Issuance, Trading, and Settlement Work Under Existing Regulation,” and the lineup of participants reflects the cross-industry importance of the issue—Nasdaq represents market infrastructure, BlackRock represents asset management, Citadel Securities represents market makers, Coinbase represents the crypto ecosystem, Robinhood represents retail brokerage, and Galaxy Digital represents crypto investment banking, covering almost all key nodes in both traditional finance and the digital asset space.

The background of the meeting stems from the ongoing accumulation of regulatory pressure. Nasdaq's recent formal proposal directly requests permission for listed stocks to be traded in tokenized form on the same order book as traditional stocks, emphasizing that blockchain settlement technology does not need to operate outside the regulatory framework of the National Market System (NMS). This move leaves the SEC with no choice but to confront the core issue: when blue-chip stocks like Apple and Amazon truly exist in blockchain form, how will their issuance, trading, and settlement processes operate without undermining existing investor protection mechanisms? SEC Commissioner Hester Peirce's statements in July have set the tone for this—tokenization “does not have the magic to change the nature of the underlying asset”; tokenized securities are still securities and must be subject to comprehensive regulation under federal securities law.

The core value of this meeting lies in the challenging leap from theoretical principles to implementation details. The committee will coordinate all parties for the first time in a public setting, directly addressing a series of highly technical yet crucial operational issues: How should the responsibility for private key custody be allocated between brokers and clients? How should the National Best Bid and Offer (NBBO) mechanism be adjusted when the settlement cycle is shortened from T+2 to seconds? Can traditional short-selling strategies be seamlessly transplanted into a tokenized stock environment? These seemingly trivial details are actually key to whether tokenization can be realized, as any loophole could undermine market fairness or erode the bottom line of investor protection.

Compliance Architecture Analysis: Blockchain as the Technical Path for Backend Ledger

The blueprint submitted by Nasdaq provides the clearest technical architecture for “in-system tokenization” to date. This solution allows the same listed stock to be traded in parallel in both traditional digital form and token form, with both forms sharing the exact same CUSIP codes, order execution priorities, and economic rights distribution. The key point is that tokens only exist at the settlement layer; issuers still complete registration disclosures as required by the Securities Act, exchanges continue to operate in accordance with the Trading Act regulations, brokers continue to route orders through a unified data stream, and the depository trust company (DTC) still bears the ultimate delivery guarantee responsibility. This design essentially replaces the backend record-keeping system with blockchain, rather than reconstructing the frontend market rules.

The brilliance of this architecture lies in its complete integration into the existing Regulation NMS regulatory framework. This means that tokenized stock trading still needs to contribute to the formation of the National Best Bid and Offer (NBBO), market makers continue to bear the obligation of continuous quoting, and the market surveillance system can still identify and prevent wash trading and deceptive practices. Nasdaq specifically warns in its proposal that if tokenized stocks are allowed to establish parallel trading venues outside the NMS system, it will inevitably split market liquidity, disrupt the price discovery mechanism, and lead to issuers being unable to track the true trading trajectory of their stocks. The document clearly opposes any regulatory exemptions: the essence of tokenization is a settlement technology innovation, rather than a new asset class that requires differentiated regulation.

The reconstruction of the settlement process is particularly critical. Nasdaq has disclosed that DTC is actively building blockchain infrastructure to enable token transactions to be settled on-chain while keeping the existing architecture of the exchange's matching engine and market data feeds unchanged. If this “blockchain settlement layer” is deployed as planned in the first half of 2026, real transactions could start as early as the third quarter of next year. The model assumes that transfer agents will manage the tokenized register to the same standards as the existing book-entry registration, complying with the same custody requirements and financial responsibility rules, with the only difference being that the underlying database technology is migrated from traditional systems to blockchain.

Key Milestones in Stock Tokenization Implementation

Regulatory Discussion: SEC Investor Advisory Committee Meeting (December 4, 2025)

Technical Standards: DTC Blockchain Settlement System Design Finalization (Q1 2026)

Improvement of Rules: Confirmation of Applicability of Regulation NMS (Q2 2026)

System Testing: Tokenization of Stock Simulation Trading (Q3 2026)

Real trading launch: The first batch of tokenized stocks will be listed for trading (as early as Q4 2026)

Participating institutions: Nasdaq, BlackRock, Coinbase, Citadel Securities, Robinhood, Galaxy Digital

Dilemma of Rights Protection: Legal Boundaries of Native Issuance and Wrapped Tokens

The core conceptual difference that needs to be clarified at the meeting on December 4 is the essential distinction between natively issued tokenized stocks and packaged token structures. Native tokens refer to the issuance company actively registering equity on the blockchain or authorizing its transfer agent to maintain an on-chain shareholder register, ensuring that token holders enjoy complete voting rights, dividend distribution rights, and liquidation priority. Packaged tokens, on the other hand, are commonly found on offshore trading platforms and only provide economic exposure for price tracking—when the underlying stock rises, token holders profit, but they cannot participate in shareholder meetings or exercise shareholder rights in corporate governance.

Nasdaq uses the lessons from certain European platforms as a warning in its proposal. The so-called “Apple Tokens” and “Amazon Tokens” traded on these platforms have experienced severe deviations from the underlying stock prices, and the issuance process was not authorized by the companies. Holders had neither voting rights nor settlement rights. When the prices of these tokens collapsed, investors were shocked to find that what they actually held were synthetic derivatives rather than true company equity. The exchange sternly pointed out that allowing such unregistered products to flood the U.S. market would substantially undermine the investor protection system established by securities laws, creating a gray equity market that regulation cannot cover.

The committee will closely examine the transmission mechanism of shareholder rights within the tokenization structure. This is not due to the SEC's confusion about “what constitutes a stock,” but rather because the intermediary layer introduced by the packaged structure may intercept or distort the transfer of rights. When a Token only provides price exposure, its legal nature begins to approach that of a security swap, triggering distinctly different disclosure and margin requirements under the Dodd-Frank Act. The Securities Industry and Financial Markets Association (SIFMA) clearly emphasized in its submitted comment letter that investors must retain the same legal and beneficial ownership under the tokenized form as they would with traditional shareholding; otherwise, the product will transform into a fundamentally different type of financial instrument.

From the perspective of judicial practice, the criteria established by the U.S. Supreme Court in recent years in the Howey test and Reves test remain applicable. Tokenization does not change the legal nature of the underlying assets, but the complexity of the packaging structure may blur the boundaries of rights and responsibilities. The argument logic regarding “investment contracts” in the 2024 SEC v. Ripple case can be directly extended to the stock tokenization scenario: if investors have a reasonable expectation of profits derived from the efforts of others, even if it exists in the form of tokens, it should still fall under the scope of securities regulation. This legal continuity provides certainty and security for native tokenization, while excluding non-compliant packaging structures from protection.

Regulatory Friction Spectrum: Challenges from Technical Adaptation to Rule Reconstruction

The agenda of this meeting effectively outlines the regulatory friction spectrum faced by stock tokenization. In the low-friction zone, issuers register tokenized stocks and list them on national stock exchanges, exchanging them with traditional digital stocks - as depicted in the proposal by NASDAQ. The existing legal framework of the Securities Act and the Exchange Act provides a legal basis for this, as long as tokenization is characterized as an innovation in settlement methods rather than an innovation in securities products. Blockchain as a record-keeping technology also meets the requirements, provided that registered clearing agencies and transfer agents meet current standards for custody, book records, and financial responsibility. The SEC staff's earlier statements regarding the custody of digital assets have defined it as a compliance engineering issue.

High-friction areas involve fundamental rule restructuring. The realization of 24/7 continuous trading of listed stocks directly impacts the core assumptions of Regulation NMS regarding trading hours and consolidated data. Although regulators have discussed all-weather markets in the context of cryptocurrency, applying it to the tokenization of Apple stocks means rewriting the best execution rules—how do brokers fulfill their fiduciary duties to retail clients when New York is closed and Tokyo is trading? Another high-friction model is that tokenized stocks trade only on non-NMS blockchain venues and are not registered as exchanges or alternative trading systems, which directly conflicts with existing market structure rules. NASDAQ and SIFMA have both warned that allowing equity trading volume to migrate to unconnected platforms will tear apart the NBBO, exposing retail investors to the risk of stale quotes.

Legislative dynamics show trends in the opposite direction. The “Responsible Financial Innovation Act” being advanced by the Senate clearly classifies tokenized stocks and bonds as securities, consolidating the SEC's regulatory jurisdiction. This indicates that any attempts to place tokenized equity outside the scope of securities law will face legislative resistance rather than smooth sailing. A possible compromise path is to allow tokenized stocks to operate within existing trading hours while setting up special systems for cross-border transactions and extended hours. This incremental reform respects the existing market structure while reserving space for technological innovation, aligning with the SEC's consistent philosophy of cautious regulation.

Market Impact Outlook: The Acceleration of Integration Between Traditional Finance and Crypto Finance

If the SEC gives the green light for compliant stock tokenization, the global equity market may witness the most profound infrastructure transformation since the advent of electronic trading. The settlement cycle shortening from T+2 to nearly real-time will significantly reduce counterparty risk and systemic risk. Research by the Bank for International Settlements (BIS) shows that the global equity market incurs approximately $80 billion in opportunity costs annually due to settlement delays, and tokenization technology is expected to eliminate a large portion of this efficiency loss. Moreover, the programmability of blockchain empowers stocks with new functionalities—automatic dividend distribution, instant voting execution, and dynamic rights management— which may enhance shareholder engagement and corporate governance efficiency.

The opportunities and challenges brought by tokenization vary for different types of market participants. Retail investors may find it easier to participate in high-priced stock investments through fractional shares, while the transparency of on-chain records makes ownership tracking and auditing simpler. However, new risks arise: vulnerabilities in smart contracts may lead to execution errors of rights, mismanagement of private keys could result in irreversible asset losses, and cross-chain interoperability issues may trigger settlement failures. These risks necessitate the simultaneous upgrade of custody services, insurance products, and regulatory frameworks; otherwise, they could hinder widespread adoption.

From the evolution of the competitive landscape, traditional exchanges, crypto platforms, and fintech companies will redefine their positions in the tokenization ecosystem. Existing exchanges like Nasdaq may dominate the early market due to regulatory compliance advantages, but crypto-native platforms like Coinbase are more flexible in user experience and technology integration. Asset management giants like BlackRock may issue tokenized fund shares, further blurring the boundaries between traditional securities and digital assets. The platforms that ultimately succeed will be those that can simultaneously meet the requirements of technological innovation, regulatory compliance, and user experience, and this conference serves as a key stage for all parties to showcase this balancing ability.

The SEC meeting on December 4 may not directly establish rules, but it could become a cognitive turning point for the traditional equity market to embrace blockchain technology. As Nasdaq and Coinbase share the vision of a tokenized future, we are witnessing a dialogue between two previously parallel worlds—one is the investor protection system honed over a century, and the other is the distributed ledger technology that pursues extreme efficiency. The true test of stock tokenization lies not in technological feasibility, but in finding a sustainable balance between innovation and regulation, efficiency and fairness, openness and norms. Regardless of the conclusions of this meeting, one trend is clear: on-chain stocks are no longer a theoretical concept, but an impending commercial reality. In the coming year, the prudence of regulators and the creativity of market players will jointly determine how this reality integrates into the global financial context.