Global Regulators Warn Over Tokenized Stocks' Risks

Global stock exchanges and regulatory bodies are intensifying scrutiny over tokenized stock offerings, particularly those being pushed by platforms such as Coinbase and Robinhood. The World Federation of Exchanges (WFE), an influential body representing the world’s leading exchanges and clearing houses, has issued a formal letter to key regulators, including the U.S. SEC’s Crypto Task Force, the European Securities and Markets Authority (ESMA), and IOSCO’s Fintech Task Force, warning that these digital securities could mislead investors and erode trust in traditional financial markets [1]. The WFE emphasized that while tokenized stocks appear to mimic conventional equities, they often fail to offer equivalent rights or protections [3].

The WFE specifically criticized the aggressive expansion of tokenized equity products by platforms like Robinhood and Coinbase. Robinhood has already launched tokenized stocks in the EU and plans to introduce tokens tied to private companies, while Coinbase is seeking regulatory approval in the U.S. to offer similar products. The WFE urged regulators to enforce existing securities laws on these tokens and to restrict marketing that equates them with actual stocks [4]. It also raised concerns about reputational risks for issuing companies if tokenized versions of their shares fail or mislead investors [5].

Despite the regulatory scrutiny, both companies remain committed to advancing their tokenized offerings. Robinhood recently offered a 2% incentive to users for unstaking ETH, highlighting its aggressive approach to capturing market share in the digital finance space. Coinbase, meanwhile, has applied for explicit regulatory permission to offer tokenized equities to U.S. customers [1]. Neither company has yet responded to the WFE’s letter, and regulators such as the SEC and ESMA have not provided immediate public feedback [5].

Regulatory clarity remains a central issue. The WFE has called for three specific actions: strict enforcement of current securities laws, clear rules on ownership and custody, and restrictions on misleading marketing practices. Some regulators, including a sitting SEC commissioner, have already signaled that any tokenized securities must comply with existing regulations. At the same time, there are discussions about potential innovations, such as a proposed U.S.-UK crypto sandbox for tokenized asset experimentation [4].

The tokenized stock market, while still relatively small, has already exceeded $26 billion in value, with tokenized stocks making up a portion of that total. Proponents argue that these products offer benefits such as reduced trading costs, faster settlement times, and the ability to trade outside traditional market hours. However, regulators remain cautious about whether these innovations align with existing legal and compliance frameworks [3].

The growing regulatory pushback has already had a visible impact on market sentiment. In early August, shares of Coinbase and Robinhood experienced notable declines, reflecting investor concerns over the long-term viability of tokenized stock products amid increased scrutiny [2]. Despite these developments, both companies continue to emphasize the potential for digital finance to enhance market accessibility and liquidity [6].

The debate underscores the ongoing tension between traditional financial institutions and emerging crypto-native platforms. While crypto firms view tokenization as a natural evolution of capital markets, regulators and traditional exchanges warn of potential risks to stability and investor protection if these products operate without standardized oversight [7].

Coinbase and Robinhood have not yet publicly addressed the growing criticism, though some industry observers suggest the companies may be preparing for potential regulatory challenges by working to align their offerings with existing financial regulations [8]. As the regulatory landscape continues to evolve, the future of tokenized stock products will depend on how regulators choose to balance innovation with investor protection and market integrity.

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[1] https://cryptorank.io/news/feed/0212f-coinbase-and-robinhood-face-global-pushback-over-tokenized-stock-offerings

[2] https://www.investing.com/analysis/why-are-coinbase-and-robinhood-shares-decline-today-200665838

[3] https://bitcoinist.com/stock-exchanges-crackdown-crypto-tokenized-stocks/

[4] https://www.thecoinrepublic.com/2025/08/25/crypto-news-global-exchange-groups-warn-against-tokenized-securities-amid-market-surge/

[5] https://coinstelegram.com/news/global_regulators_and_exchanges_push_back_on_tokenized_stocks_in_sec_letter_report/

[6] https://moneycheck.com/global-exchanges-urge-crackdown-on-coinbase-and-robinhood-stock-tokens/

[7] https://www.cryptotimes.io/2025/08/26/global-exchanges-warn-tokenised-stocks-could-threaten-market-trust/

[8] https://www.fastbull.com/news-detail/another-crypto-carnage-eth-drops-by-over-500-news_6100_0_2025_3_9297_3/6100_OKB-USDT