Global stock exchanges are reportedly urging regulators to clamp down on the fast-growing trade of tokenized stocks. They warn that the blockchain-based products pose fresh risks to investors.
In a letter sent to the US SEC’s Crypto Task Force, the European Securities and Markets Authority, and IOSCO’s Fintech Task Force, the World Federation of Exchanges (WFE) urged policymakers to tighten oversight over such stocks.
This comes in as SEC Commissioner Hester Peirce, in June, stressed that tokenized securities remain subject to existing securities law. However, the crypto market is still in its early stages of gaining regulatory clarity globally.
WFE flags tokenized stock risks
“We are alarmed at the plethora of brokers and crypto-trading platforms offering or intending to offer so-called tokenized U.S. stocks,” wrote WFE. It is noted that many of the tokezised stocks are being marketed as near-equivalents to equities when in reality they are not. Meanwhile, the group declined to single out firms by name.
Robinhood this summer began offering tokenized equities in Europe. Coinbase is seeking permission to launch similar products in the US. They argue that stock coins will slash costs, draw new users, and cut trading frictions.
On the other side, the WFE believes that these products mimic the look of shares without conferring the same rights or safeguards. It added that issuers of the underlying stocks could suffer reputational damage if the tokens fail, the report mentions.
Crypto Mom cautions while Coinbase goes all-in
In June, the US crypto task force Peirce had stated that “Tokenised securities are still securities.” She asked the market participants to comply with federal rules when issuing or trading them. While her remarks are not formal SEC policy, her influence at the agency gives them weight. Known as “Crypto mom,” she was appointed during President Trump’s first administration.
The return of Donald Trump to the White House had already sent the digital assets market booming. The cumulative crypto market cap breached the $4 trillion mark as Bitcoin (BTC) went on to register its fresh all-time high of above $124k. Even Ethereum posted its new ATH, closing in on $5,000.
Ethereum has managed to outclass Bitcoin in this cycle. ETH price surged by more than 77% over the last 90 days, while it’s running up by 18% on a YTD basis. BTC, which led the market in the first quarter, grew by just 2% over the last 90 days and is up by 18% on YTD.
Amid all the proceedings, Coinbase confirmed last month it is working on an expansion of its core trading app into what it calls an “everything exchange.” It aims to bring all assets, including stocks, derivatives, real-world tokens, prediction markets, and even early-stage token sales, on-chain. This puts Coinbase directly against Robinhood, Gemini, and Kraken, all of which are experimenting with tokenized equities abroad.
