Key Takeaways
- The WFE underlined that it was “alarmed” by the rapid growth of brokers and crypto platforms offering tokenised U.S. stocks.
- The group argued that tokenised stocks are often promoted as being equivalent to shares, despite lacking the rights and protections that come with traditional equity ownership.
In a major development, three leading market organisations have urged regulators to tighten supervision of tokenised stocks, warning that the emerging products pose risks to investors and could undermine confidence in financial markets.
In a letter addressed to the U.S. Securities and Exchange Commission’s (SEC) Crypto Task Force, the European Securities and Markets Authority (ESMA), and the International Organization of Securities Commissions’ (IOSCO) Fintech Task Force, the World Federation of Exchanges (WFE) called for greater scrutiny of blockchain-based tokens linked to equities.
Tokenised equities refer to the digital representations of real-world company shares that exist on a blockchain. In some models, an institution holds the actual share in custody and issues tokens that represent fractional or full ownership of it.
As per a Reuters report, the WFE underlined that it was “alarmed” by the rapid growth of brokers and crypto platforms offering tokenised U.S. stocks. The group, which represents exchanges and clearing houses globally, argued that these products are often promoted as being equivalent to shares, despite lacking the rights and protections that come with traditional equity ownership.
The organisation warned that such marketing could mislead investors, while also creating reputational risks for companies whose stocks are being mirrored without their involvement. The letter further highlighted the absence of established safeguards around ownership and custody, urging regulators to ensure that securities rules are applied consistently to tokenised assets.
Tokenised equities have been promoted by some in the crypto sector as a way to lower trading costs, enable faster settlement, and support 24/7 markets. Exchanges such as Coinbase and brokerages like Robinhood are among the firms exploring opportunities in the sector.
As per figures from rwa.xyz, tokenised stocks account for around $26.5 billion tokenized securities market.
The WFE, however, emphasised that these innovations must not come at the expense of investor protection and market integrity. “These products are marketed as stock tokens or the equivalent to stocks when they are not,” the letter stated.
Nandini Sukumar, chief executive of the WFE, said the group’s stance reflects broader concerns across the financial industry, noting that some listed companies have already raised the issue with their exchanges.
