NYSE owner ICE taps tZERO for tokenized securities push, takes stake in firm

Intercontinental Exchange (ICE), the owner of the New York Stock Exchange, is adding another piece to its tokenization plans, tapping blockchain infrastructure firm tZERO to help build the plumbing behind its upcoming market for tokenized securities.

The two firms will work on the transfer-agent and broker-dealer systems needed to settle tokenized securities trades onchain, they said Monday. ICE will also invest in tZERO's latest financing round and license its portfolio of 103 blockchain patents.

The size of the investment wasn't disclosed.

TZERO is expected to become an approved digital transfer agent and participant on ICE's planned NYSE-affiliated platform, subject to regulatory and technical requirements. That means it would help keep track of who owns the tokenized shares as they change hands and make sure those transfers comply with securities rules.

Wall Street's tokenization plumbing

The deal shows how Wall Street's tokenization push is moving beyond just putting stocks and bonds on blockchain rails. The harder part is building the plumbing around them — such as trading, settlement, ownership records and collateral — while fitting those systems into existing securities rules.

The potential market is large. Citi projected that tokenized securities could reach $5.5 trillion by 2030, as banks, asset managers and market operators experiment with moving traditional financial assets onto blockchain rails.

ICE and tZERO will also explore using tokenized assets as collateral at ICE's clearing houses and other businesses. That could eventually let a tokenized security be posted to back trades elsewhere in ICE's markets.

ICE had already tapped Securitize (SECZ), best known as BlackRock’s tokenization partner, in March as a digital transfer agent eligible to mint blockchain-native securities for corporate and ETF issuers on the planned NYSE-affiliated platform.

The two tokenization firms are also locked in a legal dispute: Securitize sued tZERO in June seeking a ruling that it does not infringe tZERO's patents, after tZERO sent the company a cease-and-desist letter alleging infringement.

Read more: Here is why Nasdaq and owner of NYSE are putting the $126 trillion equity market on blockchain