Tokenized stocks are digital representations of traditional equities on a blockchain that can mimic ownership but often lack full investor protections. ESMA, IOSCO and the World Federation of Exchanges warn the SEC to tighten oversight to reduce custody, disclosure and counterparty risks for retail investors.
Regulators urge stricter oversight of tokenized stocks to protect investors.
Tokenized assets exceed $26 billion; tokenized stocks remain a small but growing subset.
Major market bodies — ESMA, IOSCO and WFE — told the SEC they “mimic” equities yet lack built-in market protections.
Tokenized stocks face regulatory scrutiny as ESMA, IOSCO and WFE urge the SEC to tighten oversight; read concise analysis, risks and next steps from COINOTAG.
What are tokenized stocks and why are regulators alarmed?
Tokenized stocks are blockchain-issued digital tokens intended to represent shares in public companies. Regulators including ESMA, IOSCO and the World Federation of Exchanges warn these tokens often do not convey legal shareholder rights, raising custody, disclosure and counterparty risk for investors.
Industry data shows the broader tokenized-assets market has passed $26 billion, though tokenized equities are a small slice of that total. Reuters reported the joint letter to the US SEC Crypto Task Force urging enhanced oversight.
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Tokenized equities can mimic price exposure to shares but typically do not embed shareholder rights such as voting or claim on corporate actions. Market associations say these products are often marketed as equivalent to stocks “when they are not.” This distinction drives the push for regulatory clarity and enforcement.
Regulatory bodies referenced include the European Securities and Markets Authority (ESMA), the International Organization of Securities Commissions (IOSCO) and the World Federation of Exchanges (WFE). Their concerns focus on disclosure, custody, settlement and the legal enforceability of token-holder claims.
The WFE warned of a growing number of brokers and crypto platforms offering “stock tokens” that are marketed as equivalent to equities. Reuters has documented the signatories’ letter urging action by the SEC Crypto Task Force.
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Source: https://en.coinotag.com/esma-iosco-and-wfe-urge-sec-to-consider-tightening-oversight-of-tokenized-stocks-as-wall-street-interest-grows/