Ethereum News Today: Tokenized Stocks Stuck in Regulatory Limbo as Senate Seeks Clarity

The U.S. Senate has introduced a key update to its crypto market structure bill, the Responsible Financial Innovation Act of 2025, which aims to clarify the regulatory status of tokenized assets. A new provision ensures that when stocks and other securities are tokenized on a blockchain, they remain classified as securities, not commodities. This distinction is critical for aligning tokenized assets with existing broker-dealer frameworks and trading infrastructure [1]. The legislation is led by Senator Cynthia Lummis of Wyoming, who emphasized the goal of having the bill signed into law before the end of the year [1].

The bill addresses the division of oversight between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). It outlines when digital assets fall under SEC jurisdiction versus CFTC oversight. The Senate Banking Committee is expected to vote on SEC-related provisions this month, while the Agriculture Committee will consider CFTC oversight in October. A full Senate vote is anticipated as early as November. While the draft remains without Democratic support, Lummis noted that bipartisan negotiations are underway, with efforts being made to align Democrats and Republicans on key sub-issues [1].

In parallel, a coalition of 112 crypto firms, including major names like Coinbase, Kraken, Ripple, a16z, and Uniswap Labs, has urged the Senate to include protections for software developers and non-custodial service providers in the final legislation. The coalition warned that outdated financial regulations risk misclassifying these entities as intermediaries, potentially stifling innovation and driving developers abroad. Data from Electric Capital shows the U.S. share of open-source blockchain developers has declined from 25% in 2021 to 18% in 2025 [1]. The firms argue that regulatory clarity is essential to retaining talent and maintaining the U.S.’s leadership in blockchain innovation [1].

Internationally, concerns about tokenized stocks have been raised by regulators. Natasha Cazenave, Executive Director of the European Securities and Markets Authority (ESMA), highlighted that many retail investors may not fully understand that tokenized stocks are not direct equity in a company, but rather backed by shares held in a special-purpose company. This structure, while offering benefits like transparency and efficiency, introduces risks such as investor confusion and reduced market integrity [2]. Similarly, the World Federation of Exchanges (WFE) warned that tokenized stocks traded outside regulated markets could drain liquidity from traditional exchanges and complicate asset ownership in the event of a trading platform failure [2].

Despite these regulatory concerns, the market for tokenized equities continues to grow. xStocks, a product launched by Backed Finance, recently expanded to Ethereum, offering tokenized versions of 60 major stocks including NVIDIA, Amazon, Tesla, and Walmart. The platform, already active on Solana, BNB Chain, and Tron, emphasizes accessibility by leveraging Ethereum’s widespread adoption in decentralized finance [3]. However, the tokenized stock market remains relatively small, with a current market capitalization of $342 million, or 1.2% of the broader $27.9 billion tokenized real-world asset (RWA) market [3]. Proponents argue that tokenization democratizes investing, but legal experts note that tokenized stocks may not offer the same legal protections or voting rights as traditional stocks [3].

Source:

[1] Senate crypto bill tokenized securities clarification (https://cointelegraph.com/news/senate-crypto-bill-tokenized-securities-clarification)

[2] Regulator Voices Concerns That Tokenized Stocks Could Cause Investor Confusion (https://www.paymentsjournal.com/regulator-voices-concerns-that-tokenized-stocks-could-cause-investor-confusion)

[3] Tokenized Equity Product xStocks Launches on Ethereum (https://cointelegraph.com/news/xstocks-launches-ethereum-60-tokenized-stocks-nvidia-tesla)