WFE Urges Stricter Regulation for Tokenized Stocks Amid Market Integrity Risks

The World Federation of Exchanges (WFE) has called for urgent regulatory action against tokenized stocks, warning that they pose significant risks to market integrity and investor protection. In a series of statements in August 2025, the WFE highlighted how these digital assets are often marketed as equivalents to traditional listed shares, despite lacking genuine ownership rights, dividend entitlements, or voting power [1]. The WFE described such tokens as "copycats" that operate in legal grey areas and can mislead retail investors into believing they hold the same rights as traditional equity holders [2]. The federation emphasized the need for a clear legal framework to bring tokenized stocks under the same regulatory umbrella as conventional securities [3].

The WFE’s stance focuses particularly on synthetic stock tokens, which replicate the price movements of real equities but do not confer actual ownership. According to WFE CEO Nandini Sukumar, these products are frequently promoted as stock tokens or equivalents to listed shares, when in reality they are not. This mischaracterization, she noted, undermines investor confidence and could destabilize markets [4]. The WFE has urged regulators such as the U.S. Securities and Exchange Commission (SEC) and the European Securities and Markets Authority (ESMA) to apply existing securities laws more rigorously to these instruments [5]. The organization is also working with the International Organization of Securities Commissions (IOSCO) to push for a unified global approach [6].

The call for regulation comes amid a rapidly growing tokenization market. While the sector is currently valued at around $26 billion, projections suggest tokenized equities could expand to as much as $1.3 trillion. However, the WFE and its partners caution that without robust regulatory safeguards, this growth could create a "ticking bomb" scenario. The lack of clarity on ownership, custody, and rights of token holders is seen as a critical vulnerability [7]. The WFE argues that preemptive action is necessary to avoid systemic risks, particularly as more platforms begin offering these synthetic financial products [8].

Platforms trading tokenized stocks may soon face increased compliance requirements, which could impact liquidity and volatility. Investors and institutions will need to adjust to evolving regulatory environments as enforcement actions intensify. The WFE’s statements signal a potential shift in how tokenized equities are governed, with a likely alignment to traditional market standards. This could lead to tighter regulations on Ethereum-based platforms, reducing the speculative nature of these assets and bringing them in line with established financial frameworks [9].

By advocating for stricter oversight, the WFE aims to ensure transparency and stability in the financial system. The repeated emphasis on clarifying legal ownership and custody rights reflects a broader push for harmonization in global markets as tokenization continues to evolve. The WFE’s actions are expected to influence future regulatory developments, shaping the trajectory of tokenized assets in the years ahead [10].

Source:

[1] Stock exchanges urge regulators to crack down on '... (https://www.reuters.com/sustainability/boards-policy-regulation/stock-exchanges-urge-regulators-crack-down-tokenised-stocks-2025-08-25/)

[2] Why WFE called tokenized stocks 'mimics' that risk market ... (https://ambcrypto.com/why-wfe-called-tokenized-stocks-mimics-that-risk-market-integrity/)

[3] Global Regulators Warn Over Tokenized Stocks' Risks (https://www.ainvest.com/news/global-regulators-warn-tokenized-stocks-risks-2508/)

[4] WFE Urges Global Crackdown on Tokenized Stocks (https://www.livebitcoinnews.com/wfe-urges-global-crackdown-on-tokenized-stocks/)

[5] Global Regulators, Exchange Operators Target Tokenized ... (https://cointelegraph.com/news/global-regulators-crackdown-tokenized-stocks)

[6] Global Exchanges Urge Stricter Oversight of Tokenized ... (https://www.ainvest.com/news/global-exchanges-urge-stricter-oversight-tokenized-stocks-investor-risks-2508/)

[7] Tokenized equities could reach $1.3 trillion but regulators ... (https://cryptoslate.com/tokenized-equities-could-reach-1-3-trillion-but-regulators-see-a-ticking-bomb/)