The New York Stock Exchange and crypto brokerage Blockchain.com are exploring the creation of blockchain-based versions of U.S.-listed stocks and exchange-traded funds, the companies said on Wednesday, as traditional financial markets accelerate efforts to adopt tokenisation.
The planned collaboration would allow the companies to examine the sale of tokens representing securities listed on the NYSE, using blockchain technology that underpins cryptocurrencies. The companies have not yet disclosed which countries would have access to the products.
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The partnership is the latest move by a major stock exchange into tokenisation, which involves creating digital tokens on a blockchain that represent or are linked to traditional assets such as shares and bonds.
Reuters reported that the initiative comes as financial institutions increasingly explore blockchain technology as a way to modernise trading and settlement infrastructure and broaden access to financial assets.
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Data-sharing agreement
As part of the collaboration, NYSE and Blockchain.com have also agreed to share market data.
Intercontinental Exchange, the parent company of NYSE, will distribute Blockchain.com's cryptocurrency market data and analytics, while Blockchain.com will incorporate NYSE data into its application, the companies said.
Blockchain.com, which is based in London and Dallas, has already begun offering tokenised stocks to customers in Europe. A company spokesperson declined to disclose how many customers had purchased the products.
Investor protection concerns
Tokenised stocks can differ from conventional shares in important ways. Buyers of some blockchain-based stock tokens may not receive the same shareholder rights as holders of traditional equities and may not legally own the underlying shares.
That has raised questions over investor protection, particularly around voting rights, dividends and the legal structure supporting the tokens.
Supporters of tokenisation argue that blockchain-based securities could broaden access to stocks and allow trading beyond the conventional hours of stock exchanges.
US regulatory shift
The move comes shortly after the U.S. Securities and Exchange Commission introduced a temporary, conditional exemption for certain platforms trading tokenised U.S. stocks on blockchain-based venues.
The SEC's September 17 order provides qualifying tokenised securities venues with a five-year exemption from the definition of an exchange under U.S. securities law, subject to conditions. The framework is intended to facilitate limited onchain trading while regulators assess the technology and consider longer-term rules.
The SEC has also specified that qualifying tokenised stocks must provide holders with the same rights and privileges as traditional securities, including dividend and voting rights. Issuers must also have an opportunity to object to their securities being traded on such venues.
The regulatory changes are part of a broader push by financial-market infrastructure providers to bring traditional securities onto blockchain networks. London Stock Exchange Group, for example, said earlier this month that it plans to launch tokenised UK shares and is working with crypto exchange Kraken's parent Payward on blockchain-based equity trading.
For NYSE and Blockchain.com, the latest partnership represents another step toward testing whether blockchain-based securities can become part of mainstream equity-market infrastructure while regulators and market participants work through questions around ownership, liquidity and investor protection.
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