Blockchain.com Partners with NYSE to Deliver Tokenized American Equities to Digital Asset Traders
A new partnership between Blockchain.com and the New York Stock Exchange will provide tokenized stocks and market data services as the appetite for blockchain-based equities expands.
The New York Stock Exchange and Blockchain.com have entered into a memorandum of understanding that will provide Blockchain.com's user base with the ability to access tokenized stocks and exchange-traded funds listed on US markets via the NYSE's forthcoming digital trading infrastructure.
According to the terms of the proposed partnership, Blockchain.com would serve as a distributor for tokenized American equities and ETFs that trade on the NYSE's digital alternative trading system (ATS), pending regulatory clearance. This collaboration would make NYSE's upcoming tokenized securities platform available to the worldwide customer network of Blockchain.com.
The memorandum of understanding additionally includes provisions for sharing market data between the two entities. ICE Data Services, an affiliate of NYSE, intends to provide Blockchain.com's cryptocurrency market data and analytical tools to its client base, while Blockchain.com would incorporate selected ICE and NYSE market data streams into its own platform.
In remarks to Cointelegraph, Reid Noch, vice president of US equity market structure at TD Securities, characterized the NYSE's proposed tokenized ATS as appearing "primarily like a play for retail flow," citing its anticipated 24/7 trading capabilities and request-for-quote features. Given that retail transactions are already pre-funded, Noch noted that transitioning to immediate settlement would necessitate minimal adjustments to current retail operational processes.
"The bigger differentiator is true weekend trading," Noch said. "This could be impactful for retail heavy names or around episodic news events, similar to what we saw with tokenized oil PERPs during the start of the Iran conflict that started over the weekend."
Exchanges race into tokenized stocks
"Crypto venues are becoming multi-asset platforms, and traditional assets are adopting the 24/7, programmable structure crypto pioneered," Tanay Ved, senior research associate at institutional digital asset technology firm Talos, said in comments shared with Cointelegraph.
This transformation is unfolding throughout the major exchange landscape. Kraken provides xStocks and has established a partnership with Nasdaq on a distinct tokenized equity framework, while Binance, Coinbase and Robinhood have introduced their respective methodologies for delivering equities through blockchain technology.
Nevertheless, Ved noted that the varying approaches present compromises between ownership structures and ease of access:
The models of tokenization sit across a spectrum, from issuer-native equity to custodial exposure to pure derivatives. Each trades ownership for accessibility. Which model wins out is yet to be seen, as we sit in the early innings of adoption. For exchanges, the opportunity is a more diversified revenue base and for the market, the line between crypto and traditional assets continues to blur.
In the meantime, the market for tokenized stocks has been experiencing rapid growth. Distributed value hit $3.14 billion as of Wednesday, representing an increase of more than 18% throughout the preceding 30 days, while the count of holders surged nearly 72% to reach 3.87 million, based on RWA.xyz data.
SEC opens path for tokenized stocks
This partnership announcement arrives fewer than seven days following the US Securities and Exchange Commission's (SEC) unveiling of a five-year "Innovation Exemption" applicable to certain platforms trading tokenized securities.
The exemption permits qualifying tokenized securities platforms to utilize permissioned automated market maker liquidity pools for facilitating trades without classification as exchanges under the Exchange Act. Among the stipulations, platforms must guarantee that tokenized equities maintain identical rights and privileges as their equivalent traditional shares.
These stipulations exclude certain currently available products from qualifying for the exemption in their present configuration, including Kraken's xStocks and Robinhood's Stock Tokens, which offer exposure to underlying equity instruments but fail to provide holders with identical rights enjoyed by traditional shareholders.
Nevertheless, SEC Commissioner Hester Peirce has indicated that although the exemption addresses one particular model for tokenized securities, it maintains the potential for alternative approaches that fall outside the established framework.