Exchange associations and regulators worldwide are uniting to regulate tokenized stocks, citing significant risks for investors.
Regulators' Appeal
The European Securities and Markets Authority (ESMA), the International Organization of Securities Commissions (IOSCO), and the World Federation of Exchanges (WFE) have sent a letter to the U.S. Securities and Exchange Commission (SEC) requesting stricter oversight of tokenized stocks. The letter highlights that tokenized stocks 'mimic' traditional equities but lack the investor protections present in traditional markets.
'We are alarmed at the plethora of brokers and crypto-trading platforms offering or intending to offer so-called tokenized U.S. stocks,' stated the WFE.
Market for Tokenized Stocks
Although tokenized stocks represent a small slice of the market, their volume continues to grow. According to industry data, the value of tokenized assets has already climbed past $26 billion. Tokenized stocks, which are digital representations of traditional equities on a blockchain, are garnering attention from platforms like Coinbase, Kraken, and Robinhood.
Future of Tokenization
This is not the first time regulators have joined against traditional sides of the business in the face of growing blockchain innovation. Meanwhile, the SEC remains open to tokenization; SEC Chair Paul Atkins described tokenization as an 'innovation' that should be advanced within the U.S. economy. However, tokenized securities, including equity tokens, must comply with existing securities laws.
The situation regarding tokenized stocks underscores the importance of regulatory compliance and investor protection as blockchain technology grows, opening new opportunities for the market.
