Global Pushback Against Tokenized Stocks
Regulators around the world are cracking down on tokenization. European regulatory authorities issued a Joint Call to Action to the incoming U.S. administration, urging stronger global financial oversight. The Securities and Exchange Commission (SEC) has proposed stricter rules for tokenized stocks over serious investor protection concerns.
These digital goods – blockchain-based products mirroring equities – are promoted as substitutes for actual shares, yet regulators argue they lack the basic investor safeguards of traditional markets.
In a letter sent to various authorities, the World Federation of Exchanges (WFE) stated, “We are concerned about the proliferation of so-called tokenized U.S. stocks on the market. Many of these products mimic the underlying equity but do not offer the same protections.”
A Market on the Rise
The market for asset tokenization is soaring, surpassing $26 billion in total value. Even though tokenized stocks currently represent only a fraction of the overall market, their acceptance is growing. This rise is fueled by market giants like Coinbase, Kraken, and Robinhood showing interest in tokenized securities.
Supporters argue tokenized assets cost less, are more efficient, and open access to a broader range of investors. However, authorities warn that these benefits may come at the cost of transparency and investor safety.
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Ongoing Battle Between Innovation and Regulation
Traditional finance fought against early blockchain technology in the 1990s. The GENIUS Act included rules governing stablecoins, banning yield payments due to pressure from the banking sector, which sought to protect savings products.
Despite the pressure, some within the SEC still view tokenization positively. Former SEC Chair Paul Atkins called tokenization an “innovation” worth nurturing, while SEC Commissioner Hester Peirce maintains that tokenized assets are subject to existing securities laws.
The Future of Tokenized Markets
As tokenization moves closer to mainstream adoption, the battle between regulators and innovators is expected to intensify. The pace at which tokenized stocks shift from niche offerings to mainstream financial products will depend on the SEC‘s ultimate stance — whether it decides to tighten restrictions or offer support.
