The U.S. Securities and Exchange Commission approved a rule change on Wednesday, allowing Nasdaq to support the trading of tokenized shares, marking another example of how traditional finance and crypto are converging.

Eligible participants will be able to settle trades in tokenized form during a pilot program operated by the Depository Trust Company, part of the DTCC, according to a filing.

The rule change allows participants in the pilot to opt to have stock trades settled in tokenized form, with the equities sharing the same order book and execution priority as traditional shares, the filing said. Tokenized shares must also provide shareholders with the same rights and privileges as a regularly traded equity.

Under Chairman Paul Atkins, the SEC has begun advancing crypto-related rulemaking, including work on a potential "innovation exemption" for onchain securities. The agency has generally taken a cautious stance, emphasizing that tokenized securities remain subject to existing securities laws.

The move to enable tokenized representations of traditional equities to trade on a major U.S. exchange, however, represents a significant and practical step toward potentially bringing market infrastructure onchain. So far, most tokenized stock offerings have only been available to non-U.S. users by platforms seeking to give crypto investors exposure to companies like Tesla and Apple.

Wednesday's approval also follows broader momentum from both crypto firms and traditional financial institutions advocating for tokenized securities. In December, the SEC authorized the DTCC to pilot the tokenization of certain assets on approved blockchains. Separately, the New York Stock Exchange has said it is exploring platforms for trading and settling tokenized securities, including the possibility of extended trading hours.

Notably, the push toward tokenization has faced resistance from some traditional finance groups, which argue that stronger regulatory guardrails are needed for blockchain-based securities.

On Tuesday, Atkins said the agency plans to seek public comment in the coming weeks on a range of topics tied to future rulemaking, including the proposed innovation exemption.

"I really feel strongly that we need to have that firm foundation, give people certitude, attract people back here to the United States, work on innovative products for investors and to make our financial system more efficient and less risky," Atkins said.

The SEC filing did not stipulate how long the pilot program will last.