Stock exchanges are raising concerns around the risks of tokenized stocks and demanding regulatory intervention to protect investors.
Risks of Marketing Tokenized Stocks
In a formal letter, the World Federation of Exchanges (WFE) urged the U.S. SEC and other international organizations to intervene amid growing concerns about tokenized stocks, which are not equivalent to traditional equity. The WFE pointed out that such digital tokens offered by brokers and crypto platforms do not provide real ownership rights, potentially misleading investors.
Regulators Under Pressure to Set Clear Rules
In addressing regulators, the WFE emphasizes the need for stringent adherence to existing securities laws, including ownership and custody requirements, and restrictions on marketing that misrepresents tokenized stocks. The current market for tokenized assets exceeds $26 billion, leading to concerns over the lack of a clear regulatory framework.
Next Steps for Robinhood and Coinbase
Despite regulatory concerns, companies like Robinhood and Coinbase continue to push for tokenized stocks. Robinhood already offers its European users the ability to trade tokenized stocks and is planning to provide the option to purchase tokens of private companies, such as OpenAI.
The appeal from stock exchanges is expected to prompt regulators to take swift action to safeguard investors and bolster trust in financial markets in light of growing risks associated with tokenized assets.
