Nasdaq Is Betting on Tokenized Stocks. Here's Why It Just Bought a $100 Million Stake in Kraken's Parent.

Last week, the investing world inched closer to 24/7, rapid-settlement stock trading. That, at least, is the promise of a recent initiative by stock exchange operator Nasdaq (NASDAQ: NDAQ), which reported that the effort has entered a new stage.

Specifically, the company announced it is teaming up with Payward -- the parent company of the crypto exchange Kraken -- to bring its tokenized stock platform closer to realization. Here are the key elements of this deal.

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More than a token gesture

Nasdaq divulged that its Nasdaq Ventures arm is investing $100 million in Payward. The two companies, which already collaborate on the former's Nasdaq Equity Token (NET) framework, will work together to build the infrastructure necessary for high-trust, high-reliability tokenized stock trading.

These days, tokenized stocks are essentially investments recorded on a blockchain, similar to buying or selling a cryptocurrency. The important difference between this and traditional stock transactions is that the buyer holds only a contractual claim to the stock and is not directly registered as its owner.

With the system it's developing with Payward, Nasdaq aims to confer direct ownership and the rights that come with it, such as voting, on stockholders.

In the press release touting the Payward investment and collaboration agreement, Nasdaq emphasized that its goal was to construct a platform that "helps build a more connected financial system while preserving the trust, transparency and integrity that underpin capital formation."

The trust factor

It's a little hard to pin down the average trading volumes of tokenized stock systems; regardless, they're still well down from those of classic exchange transacting.

While Nasdaq isn't exactly establishing first-mover advantage in the tokenized segment, what it's going for would represent a significant evolution. And if it's effective in meeting its stated goals for transparency and security, it can easily take the lead; Kraken would benefit, too, well beyond that $100 million investment from the exchange operator.

Nasdaq said that it and Payward are targeting a second-quarter 2027 launch for NETs. We can imagine this will occur on at least a pilot version of the new platform. While that's not long from now in calendar terms, the cryptoverse evolves quickly, and a dominant (and trusted) tokenized stock platform operator might emerge in the interim.

So to me, while Nasdaq/Payward's planned system sounds very promising, investors and other interested parties should monitor how the tokenized stock scene continues to develop. If no comparable system dominates by then, both companies could reap significant rewards by advancing the technology.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.