Stock exchanges urge regulators to crack down on ‘tokenised stocks’
The World Federation of Exchanges (WFE) has urged regulators in the U.S., Europe, and across global markets to tighten oversight of blockchain-based share proxies. The group warned that tokenised versions of stocks, though increasingly popular, can create confusion over ownership rights and potentially mislead investors. Without proper supervision, these instruments may also weaken key safeguards that protect financial markets.
As adoption of tokenised shares accelerates, the WFE stressed that enforceable regulation is critical to maintain transparency and investor protection. Clear rules, it noted, would not only prevent misuse but also help strengthen trust in blockchain-based financial instruments. By ensuring strong oversight, regulators can support innovation while preserving market integrity and allowing tokenised assets to grow alongside traditional financial systems.
What the WFE told regulators
In a letter sent to the U.S. Securities and Exchange Commission’s Crypto Task Force, the European Securities and Markets Authority (ESMA), and IOSCO’s Fintech Task Force, the WFE said that tokenised equities “mimic” listed shares without conferring the same rights or trading protections. The call for clear tokenised stocks regulation follows a rise in platforms marketing “stock tokens” as stock equivalents, even though holders aren’t shareholders in the underlying companies.
Why tokenised equities aren’t traditional shares
Tokenised equities are blockchain-based instruments designed to represent exposure to company shares. However, they typically do not grant voting rights, corporate actions access, or ownership standing within the issuer’s shareholder register. The WFE argues that, absent robust tokenised stocks regulation, investors may assume they own stockholder rights that the tokens don’t legally provide.
Who’s moving into the market
Crypto-native firms and retail brokerages have explored or launched products that mirror listed equities through token formats. Proponents say the approach can cut costs, speed settlement and enable 24/7 markets. The WFE counters that clearer tokenised stocks regulation is needed so marketing claims don’t outpace investor protections and disclosure standards.
Benefits—and the current gaps
Supporters see potential efficiency gains from programmable assets, instant delivery-versus-payment, and fractional ownership. Yet without harmonised tokenised stocks regulation, market fragmentation, custody uncertainty and opaque redemption mechanisms can introduce new risks. The WFE also warns of reputational spillovers if token values deviate from the referenced shares or fail operationally.
What to watch next
Regulators could apply existing securities rules to token formats that behave like equities, require clearer disclosures about rights and risks, and set standards for custody, pricing, and settlement. As supervisory guidance evolves, exchanges and brokers may adjust offerings to align with tokenised stocks regulation while exploring compliant on-chain market infrastructure.
Wrap It Up
In conclusion, the WFE’s call to action makes clear that tokenised stocks, while innovative, cannot be left in a regulatory grey zone. These blockchain-based proxies may offer faster settlement, fractional ownership, and new market efficiencies, but without enforceable rules they risk confusing investors and weakening long-standing protections. The absence of rights such as voting and shareholder standing only adds to the potential for misunderstanding.
For tokenised equities to mature responsibly, regulators must establish clear frameworks that address custody, disclosures, pricing, and settlement. Strong oversight will not only safeguard investors but also strengthen trust in on-chain financial products. With the right balance, tokenised stocks can serve as a secure complement to traditional markets, advancing innovation without compromising transparency and market integrity.
FAQs
Q1. What does “tokenised stocks regulation” actually cover?
A . It covers how tokens tied to equities are issued, marketed, traded, custodied and disclosed, ensuring they follow securities rules.
Q2. Do token holders get shareholder rights under tokenised stocks regulation?
A . Usually not unless the structure explicitly grants rights. Regulation clarifies what investors do and don’t receive.
Q3. Why are exchanges pushing for tokenised stocks regulation now?
A . Adoption is rising, and regulators want to prevent confusion where tokens “mimic” shares without traditional protections.
Q4. Could tokenised stocks regulation allow 24/7 trading safely?
A . Yes, with safeguards for price discovery, custody, settlement finality and transparent disclosures.
Q5. How might tokenised stocks regulation affect brokers and platforms?
A . They may need licenses, enhanced disclosures, stronger custody controls and clearer redemption mechanisms.