Tokenized Stocks Under Fire: Regulators Demand Stricter Oversight Amid Market Boom
- Keyword Financial
- Aug 25
- 3 min read
Introduction
Global financial watchdogs, including the European Securities and Markets Authority (ESMA), the International Organization of Securities Commissions (IOSCO), and the World Federation of Exchanges (WFE), have urged the U.S. Securities and Exchange Commission (SEC) to take a tougher stance on tokenized stocks. In a joint letter to the SEC’s Crypto Task Force, they argued that tokenized equities — blockchain-based representations of traditional shares — are marketed as equivalent to real stocks but lack the investor protections of regulated markets. The groups warned that these products, heavily pushed by brokers and crypto platforms, expose investors to risks by mimicking equities without the legal safeguards provided in established financial systems.
Their intervention reflects growing concern as traditional finance and crypto continue to converge. The total value of tokenized assets has surpassed $26 billion, with tokenized stocks representing a small but expanding fraction. Major platforms such as Coinbase, Kraken, and Robinhood are reportedly exploring or offering these products, fueling fears among regulators and exchange groups that the trend could outpace appropriate oversight. While tokenization offers efficiency, cost savings, and greater market accessibility, traditional market bodies worry that unchecked growth could undermine trust in securities infrastructure.
This pushback mirrors broader resistance from legacy financial lobbies against blockchain-based innovation. For instance, U.S. banking groups successfully lobbied to exclude interest-bearing stablecoins from the GENIUS Act, protecting the dominance of money market funds. Still, the SEC has shown cautious openness toward tokenization: officials like Chair Paul Atkins have described it as an innovation beneficial to the U.S. economy, though Commissioner Hester Peirce has emphasized that any form of tokenized security must still comply with existing laws. As regulators tighten their grip, the industry faces an uncertain path balancing innovation with investor protection.
