Global regulators have called on the U.S. Securities and Exchange Commission (SEC) to increase oversight on tokenized stocks that are rapidly expanding across financial markets.
Growth of Tokenized Stocks and Regulation Issues
Tokenized stocks are blockchain-based representations of company shares. They allow for trading outside regular hours, reduce costs, and speed up settlement processes. However, they do not provide shareholders with dividends, voting rights, or ownership stakes in the underlying companies.
Regulatory Position and Investor Challenges
The World Federation of Exchanges (WFE) has expressed concern about tokenized stocks, noting that despite their appeal, they do not provide the same level of safety and rights as traditional shares. "We are alarmed at the plethora of brokers and crypto-trading platforms offering or intending to offer so-called tokenized US stocks. These products are marketed as stock tokens or equivalent to the stocks when they are not," the WFE stated.
Future of Tokenization and SEC Response
In the United States, regulatory voices remain divided but clear regarding the obligations of token issuers. SEC Commissioner Hester Peirce affirmed that tokenized securities are subject to existing securities laws. Meanwhile, SEC Chair Paul Atkins referred to tokenization as an "innovation" that should be permitted to thrive within the U.S. economy. The question remains whether tokenization can expand without compromising investor trust and market stability.
The involvement of the WFE and other regulators highlights growing concerns over tokenized stocks and the need for stricter oversight. The future of tokenization will depend on the ability of both domestic and international regulatory bodies to create a safe and transparent framework for investor protection.
