WFE Urges Stricter Oversight of Tokenized Equities Amid 26.6% Market Surge

Global exchange organizations, led by the World Federation of Exchanges (WFE), have urged regulators to impose stricter oversight on tokenized equities, citing growing risks to investor protection and market stability. The WFE, along with major exchanges, sent a formal letter to the US Securities and Exchange Commission (SEC), European Securities and Markets Authority (ESMA), and International Organization of Securities Commissions (IOSCO), highlighting concerns over platforms offering tokenized assets that mimic traditional stocks without providing equivalent legal rights or protections [1].

Tokenized equities, which are blockchain-based representations of real-world stocks, have gained traction in recent months, with platforms such as Robinhood already launching the products in Europe and Coinbase seeking approval to offer them in the United States. These digital instruments do not grant ownership rights, voting powers, or the same legal protections as traditional shares, raising concerns about how they are marketed to investors [1].

The WFE warned that the increasing proliferation of these tokens could mislead investors and expose both the underlying companies and the broader market to reputational and systemic risks. The group emphasized the need to apply existing securities laws to tokenized assets, establish clear ownership and custody frameworks, and prevent misleading marketing practices [1].

Market activity in the tokenized equities space has surged significantly, with a reported 26.6% growth in 2025, pushing the market to a trading volume of $360.5 million. While proponents argue that tokenization can reduce trading costs, speed up settlement times, and enable 24/7 trading, the WFE cautioned that these benefits must be balanced with robust regulatory safeguards to prevent fraud, misinformation, and instability [2].

Regulators have responded with caution. SEC Commissioner Hester Peirce reiterated in June that tokenized securities remain subject to existing securities laws, regardless of their digital form. The WFE’s position aligns with this view, reinforcing the need for updated frameworks that address the unique risks posed by tokenized products [1].

The WFE did not name specific platforms in its letter but stressed the urgency of regulatory clarity as innovation in the sector accelerates. The growing interest from crypto platforms underscores the importance of balancing innovation with investor protection, ensuring that the tokenized equities market develops in a transparent and secure manner [3].

As the market continues to evolve, regulators are now under increasing pressure to respond with clear guidelines that safeguard investors while enabling responsible innovation. The outcome of these efforts will likely shape the future of tokenized securities and determine whether they can coexist with traditional financial markets without undermining trust and stability [3].

Sources:

[1] Stock exchanges call for stricter regulation of 'tokenized stocks' (https://www.proactiveinvestors.com/companies/news/1077264/stock-exchanges-call-for-stricter-regulation-of-tokenized-stocks-1077264.html)

[2] Global Exchanges Urge Stricter Regulation of Tokenized ... (https://www.ainvest.com/news/global-exchanges-urge-stricter-regulation-tokenized-stocks-26-6-market-surge-2025-2508/)

[3] WFE targets tokenized stocks for clamp down in letter sent ... (https://www.cryptopolitan.com/wfe-urges-to-clamp-down-tokenized-stocks/)