The World Federation of Exchanges (WFE) sent letters to key regulators warning about the risks associated with tokenized stocks.
Warning About Tokenized Stocks
WFE sent letters to three major regulators, claiming that tokenized stocks create new risks for investors. These tokens, according to WFE, mimic securities but do not offer the same rights and protections as real stocks.
Features of Tokenized Stocks
Tokenized stocks represent ownership of underlying shares but lack some of the inherent shareholder rights, such as voting rights, dividends, and custody protections. In many cases, traders cannot redeem their tokens and can only sell them back on the issuing platform.
Market and Company Reaction
Companies such as Robinhood, Coinbase, and Kraken offer these products. However, these platforms try to clarify that tokenized stocks are not equivalent to the underlying assets. For instance, for tokenized Coinbase stock on Kraken, a different ticker COINx is used, and the platform explains that owning this instrument does not confer shareholder rights.
The issues surrounding tokenized stocks are becoming a relevant topic amidst the growing interest in innovative financial instruments and the need to protect investor interests.
