The world’s biggest stock exchanges are sounding the alarm about “tokenized stocks”—crypto assets that represent company shares. They’re worried these things are risky for investors and could mess up the whole stock market.
The Problem with Tokenized Stocks
The World Federation of Exchanges (WFE) says these tokenized equities are misleading. While they’re supposed to represent company shares, they often don’t give investors the same rights and protections as regular stocks. Plus, they’re being marketed as if they are the same thing, which is false advertising. The WFE points out that if these tokens fail, the companies themselves could face serious consequences.
Exchanges Want Regulation
The WFE wants regulators (like the SEC and ESMA) to step in. They’re asking for clearer rules on who owns these tokens, how they’re stored, and how they’re sold. Most importantly, they want to stop these tokens from being sold as if they’re just like regular stocks. Share issuers are also worried about the reputational damage if these tokenized versions of their stock fail.
Big Players Get Involved
Companies like Robinhood are already offering tokenized stocks in Europe, with plans to expand. OpenAI, however, has distanced itself from a Robinhood offering of its tokenized stock. Coinbase is also looking into offering them, but needs SEC approval.
A Clash of Titans: Banks vs. Crypto
The situation is even more complicated because of recent US legislation (the GENIUS Act) regulating stablecoins. This has created a huge fight between traditional banks and crypto advocates. Banks are worried the new rules will weaken the financial system, while crypto groups say the rules should encourage innovation, not stifle it. It’s unclear how this fight will affect the future of tokenized stocks.
The Future of Tokenized Stocks
The future of tokenized stocks depends heavily on how regulators respond to both the WFE’s warnings and the pushback from the crypto community. It’s a complex situation with a lot of uncertainty.