Ondo Urges SEC to Reject Nasdaq Tokenized Securities Plan

In a formal letter to the SEC, Ondo Finance raised fundamental concerns about Nasdaq’s proposal to trade tokenized securities, highlighting what it describes as a critical lack of transparency in the settlement process. The blockchain company, which specializes in creating tokenized versions of traditional assets, specifically pointed to Nasdaq’s reliance on undisclosed details regarding how the Depository Trust Company will handle blockchain settlements. This opacity, according to Ondo, prevents regulators and market participants from conducting a proper evaluation of the proposal’s implications for the broader financial ecosystem.

The DTC serves as the primary depository for U.S. securities and plays a crucial role in facilitating post-trade settlement across traditional markets. Ondo’s objection centers on the concern that without public disclosure of how this critical infrastructure will adapt to blockchain-based settlements, the market cannot assess potential risks, operational challenges, or competitive implications. This information gap creates what Ondo characterizes as an uneven playing field where only select participants with access to non-public information can properly evaluate and respond to the proposal.

Ondo’s letter to the SEC explicitly warned that Nasdaq’s approach could give established market players an unfair edge in the emerging tokenized securities market. The company noted that “Nasdaq’s reference to non-public information implies differential access that deprives other firms of a fair opportunity to comment” on the proposal. This concern reflects broader anxieties about how traditional financial institutions might leverage their existing relationships and infrastructure access to dominate the transition to blockchain-based financial products.

The objection highlights a fundamental tension in the financial industry’s adoption of blockchain technology: while established players like Nasdaq bring credibility and infrastructure to tokenization efforts, their proposals must ensure equal access and transparency to prevent anti-competitive outcomes. Ondo’s position suggests that without proper disclosure requirements, the very institutions meant to facilitate market efficiency could inadvertently create barriers to entry that stifle innovation and competition in the tokenized securities space.

Despite its objections to the specific Nasdaq proposal, Ondo Finance explicitly acknowledged its support for Nasdaq’s broader move toward tokenization, recognizing the importance of established financial institutions embracing blockchain technology. This nuanced position reflects the company’s understanding that traditional finance and blockchain innovation must coexist and collaborate for tokenized securities to achieve mainstream adoption. However, Ondo maintains that this progress cannot come at the cost of transparency and market fairness.

The SEC now faces a delicate balancing act in evaluating Nasdaq’s proposal. On one hand, regulatory approval could accelerate the integration of blockchain technology into mainstream financial markets, potentially increasing efficiency and accessibility. On the other hand, approving a proposal that relies on undisclosed settlement details could set a problematic precedent for future blockchain-based financial products. The decision will signal how the regulator intends to approach the intersection of traditional finance and emerging technology, particularly regarding information disclosure and competitive fairness.

Ondo’s intervention represents a critical moment in the evolution of tokenized securities regulation in the United States. As blockchain companies and traditional financial institutions increasingly converge on this space, the standards established through proposals like Nasdaq’s will likely shape market structure for years to come. The outcome of this regulatory review could determine whether tokenized securities develop as an open, competitive market or one dominated by established players with privileged access to critical settlement infrastructure.