WFE Urges Stricter Oversight of Tokenized Equities to Safeguard Market Integrity

The World Federation of Exchanges (WFE) has raised concerns over the rapid rise of tokenized equities, urging global regulators to step up oversight to prevent investor confusion and preserve market integrity [1]. In a recent letter to key regulatory bodies including the U.S. Securities and Exchange Commission’s (SEC) Crypto Task Force, the European Securities and Markets Authority (ESMA), and the International Organization of Securities Commissions’ (IOSCO) Fintech Task Force, the WFE emphasized that these blockchain-based products are frequently marketed as traditional shares but lack fundamental investor protections and shareholder rights [1].

Tokenized equities, issued on blockchain platforms, offer exposure to a company’s stock without granting actual ownership or voting rights. While they are often promoted as having benefits such as faster settlement, reduced costs, and 24/7 trading access, the WFE warned that such features could mislead investors into treating them as conventional securities [1]. The federation also noted that the failure of tokenized versions of equities could harm the reputation of the underlying companies [1].

WFE CEO Nandini Sukumar stated that exchanges and listed companies have already raised concerns about the risks associated with these products [1]. The WFE called on regulators to ensure that existing securities laws apply to tokenized assets, establish clearer custody and ownership frameworks, and prevent them from being presented as direct equivalents to traditional shares [1].

Several firms are actively engaging in tokenized equity offerings. Robinhood launched these products in Europe in June and plans to expand into tokenized shares of private companies [1]. OpenAI has clarified it has no involvement in or endorsement of Robinhood’s offerings [1]. Coinbase is also reported to be seeking SEC approval to offer tokenized equities in the U.S. [1].

Despite the WFE’s concerns, the SEC, IOSCO, and ESMA have yet to provide formal responses. A U.S. SEC commissioner previously stated that tokenized securities must comply with existing rules [1].

As the market for tokenized equities continues to expand, the need for regulatory clarity and investor protection is becoming more pressing. The WFE’s warning underscores the growing tension between innovation and market stability, and how regulators respond will shape the future of this emerging asset class [1].

Source: [1] Tokenized Equities In The Crosshairs Of Global Stock Exchanges: What Happened (https://www.benzinga.com/crypto/cryptocurrency/25/08/47316344/tokenized-equities-in-the-crosshairs-of-global-stock-exchanges-what-happened)