Nasdaq Explains: What is Tokenization?
Global capital markets are undergoing a fundamental transformation, and a central component of this evolution is the drive toward tokenization and blockchain technology.
Three interconnected trends are driving this shift: the move toward always-on markets, the convergence of digital and mainstream financial infrastructure, and the growth of technology-enabled cross-border capital flows.
While information and risk move continuously across the world, critical parts of market infrastructure remain tied to fixed trading windows and legacy operating models.
As a global leader in market infrastructure, Nasdaq sees tokenization as an enabler of the next phase for mainstream markets.
Here’s what you need to know.
What is tokenization?
Tokenization means representing a security on a blockchain — a distributed digital ledger technology originally developed for digital currencies. This is simply a different form of digital representation compared to the conventional electronic book-entry systems that have been the standard since paper certificates were replaced by electronic records decades ago.
There are three primary models for tokenized securities. In the first, a custodial model, a third party holds an actual security, such as a stock, in custody and issues a digital token that represents an ownership interest in that underlying asset. In effect, the token serves as a blockchain-based representation of a real security that is being held on the investor's behalf.
In the second, or synthetic, model, the token does not represent ownership of the underlying security itself. Instead, the third party issues a separate financial instrument designed to track or replicate the security's performance, giving investors exposure to its price movements without direct ownership of the asset.
The third model is issuer-centric equity token design, a digital asset, or a tokenized asset, that’s not just as good as the underlying security and as useful as that security, but one that is fungible and interchangeable with the underlying security and that could allow not just retail but institutions to adopt those tokens and use them in their existing workflows. These tokens can, over time, be a part of programmable workflows, leveraged in always-on environments, which will unlock balance sheets and drive efficiencies.
This is the framework that Nasdaq has followed for the Nasdaq Equity Token (NET) design.
What is the Nasdaq Equity Token (NET) design?
In March 2026, Nasdaq announced it would be working to launch an equity token design, which it described as a new approach to tokenizing equities that puts public companies at the center of ownership rights, the investor experience, transparency, and governance.
The initiative builds on Nasdaq's tokenization proposal filed with the U.S. Securities and Exchange Commission (SEC) in September 2025, in which Nasdaq proposed enabling equity securities to trade on its markets and settle in token form.
The design ensures that a transfer of a token constitutes a transfer of the underlying security itself, preserving full legal and regulatory equivalence. Blockchain records will be integrated directly into the issuer's official share registry, providing a regulated bridge between on-chain records and off-chain identity — maintaining the price discovery, consolidated liquidity, and investor protections that define U.S. equity markets.
Central to the approach is giving issuers meaningful control over how their securities exist in tokenized form.
"We want to give the issuers, number one, the choice: Do they want their securities to be tokenized? Secondly, control in terms of understanding who their investors are, modernizing their experience and connecting with those investors," Nasdaq Chair and CEO Adena Friedman said after the initiative was first announced. "Hopefully modernizing the proxy process, hopefully making some really big changes to their experience in both a permissioned and a permissionless world. We think this is the future of markets."
Simply put, Nasdaq’s equity token design aims to become a standardized, issuer-sponsored approach to represent equity ownership in token form. It will be designed to support modernized, automated workflows while remaining anchored to the principles of regulated markets.
The focus of this design is on driving standards and interoperability, so adoption can scale across the ecosystem without forcing bespoke, one-off solutions that can increase complexity or risk fragmentation.
Ultimately, tokenized workflows can improve visibility into ownership and support more timely, data-driven engagement around governance, proxy-related actions, and corporate communications.
Nasdaq's goal is to ensure we have a security and a token framework that incorporates everything that the underlying security does right now during the whole life cycle of that security, but also that it builds in the features and the functions of being able to leverage and move that security in new ways that haven't been done before.
What benefits does tokenization unlock?
As markets move toward extended and potentially continuous trading, the opportunity extends beyond process improvements. Supporting around-the-clock markets requires infrastructure capable of moving ownership records, collateral, and liquidity efficiently across longer trading windows.
Tokenization, properly designed, can deliver meaningful benefits to issuers and their shareholders. By embedding standardized data and automation directly into digital securities, tokenization can help streamline settlement and securities processing workflows, automate corporate actions, and reduce operational friction – while supporting broader access and global connectivity.
Tokenization can help enable that transition by making assets more programmable, mobile, and operationally efficient.
Importantly, tokenization is not about changing what makes public markets work; it’s about modernizing the rails underneath while preserving market liquidity, strong governance, and investor protections.
As the ecosystem develops, there is the potential to further unlock price discovery, liquidity, and deeper issuer-investor connectivity – by integrating digital innovation with the deep liquid markets that have powered the world’s economy for generations.
“Today, investors often don’t see the complexity that sits behind their brokerage account, but they bear its costs,” said Nasdaq Executive Vice President and Global Chief Legal, Risk and Regulatory Officer John Zecca. “When an investor votes a proxy, participates in a corporate action, or waits for a trade to settle, there are dozens of manual handoffs and data reconciliations occurring across issuers, intermediaries, and market infrastructure providers.”
“Those touchpoints add up. Corporate actions processing alone carries a structural cost of more than $58 billion across the industry, driven largely by fragmented systems, manual workflows, and duplicative recordkeeping,” he added. “Tokenization has the potential to streamline these processes by creating a more direct, automated, and auditable connection between issuers and investors, reducing delays, lowering operational risk, and ultimately cutting costs that flow through to the broader economy.”
What is Nasdaq’s role in tokenization?
As both an owner and operator of the world's deepest markets, and a technology provider across the global financial system, Nasdaq has unique insight into both the promise and the practical requirements of market modernization.
Nasdaq’s long history of connecting pools of capital with the innovation economy spans 135+ markets and regulators worldwide, built on the foundation of trust, integrity, and resilience that institutional investors require. The company believes the most powerful innovations emerge when combining the proven strengths of its markets today with the transformative potential of blockchain technology.
Through a series of strategic initiatives, Nasdaq is driving the convergence of on-chain and off-chain market ecosystems, while preserving the liquidity, transparency, and integrity of regulated markets.
As a financial technology provider across the global financial system, Nasdaq provides resilient and institutional grade infrastructure for trading, surveillance, and post-trade services across digital asset markets including Nasdaq Eqlipse Digital a platform designed to help market operators connect mainstream and tokenized markets.
Through industry partnerships, including with the Canton Network, Talos and Baton Systems, the company is integrating on-chain capabilities alongside existing institutional workflows to enhance capital efficiency and accelerate collateral mobility across the global financial system.
Nasdaq is also bringing institutional standards and frameworks to democratize access to digital asset markets. The company’s Index business offers benchmarks including the Nasdaq CME Crypto Index (CMI) for investable products that track cryptocurrency performance, while spot-bitcoin and Ethereum ETFs listed on Nasdaq markets provide opportunities to invest through regulated financial products.
As tokenization accelerates, the number of platforms where tokenized equities and other forms of third-party synthetic equity contracts can circulate is growing rapidly. As unregulated blockchain networks introduce synthetic equity contracts, it is becoming increasingly critical to introduce an issuer-centric approach to tokenized equities. Specifically, Nasdaq’s equity token design will ensure blockchain records are integrated directly into the issuer’s official share registry, providing a regulated bridge between on-chain records and off-chain identity. A transfer of the token will represent a transfer of the underlying security itself, preserving full legal and regulatory equivalence.
Together, these initiatives reflect a deliberate strategy to bridge traditional and on-chain finance through institutional-grade infrastructure, regulatory alignment, and issuer-centric innovation, ensuring that digital transformation enhances rather than disrupts the proven foundations of capital markets.