A coalition of the stock exchanges is urging regulators to tighten oversight of tokenized stocks, warning that the fast-growing products pose risks to investors and could undermine market trust.
In a letter sent to the US Securities and Exchange Commission (SEC), the European Securities and Markets Authority (ESMA), and the International Organization of Securities Commissions (IOSCO), the World Federation of Exchanges (WFE) said it is “alarmed at the plethora of brokers and crypto-trading platforms offering or intending to offer so-called tokenised US stocks.”
Tokenized stocks are blockchain-based digital tokens that mirror the price of listed shares but do not grant ownership rights, voting powers, or the protections that come with holding actual equities.
The WFE, which represents major global exchanges and clearing houses, warned that the products “mimic” equities without delivering the same rights or safeguards.
“These products are marketed as stock tokens or the equivalent to stocks when they are not,” the WFE said, adding that issuers of the underlying shares could face reputational damage if tokenized versions fail or collapse.
The group urged regulators to apply existing securities rules to tokenized assets, clarify ownership and custody frameworks, and prohibit marketing them as stock equivalents.
The WFE did not name which brokers or trading platforms it is referring to in its letter.
Several major crypto exchanges are entering this sector. Robinhood this summer began offering tokenized equities in Europe, while Coinbase is seeking approval to launch similar products in the US.
Proponents argue the tokens could cut trading costs, speed up settlement, and allow round-the-clock trading, features seen as attractive to retail investors.
SEC Commissioner Hester Peirce reiterated in June that tokenized securities are still subject to existing laws, highlighting that legal obligations do not disappear simply because assets are digitized.