A leading industry group representing the world’s largest stock exchanges has urged securities regulators to clamp down on the emerging market for tokenised stocks. In a letter seen by Reuters, the World Federation of Exchanges (WFE) argued that these blockchain-based tokens, which are designed to mimic company shares, create significant new risks for investors and pose a threat to overall market integrity. The WFE, a UK-based association for exchanges and clearing houses, sent its letter to key regulatory bodies, including the U.S. SEC’s Crypto Task Force, the European Securities and Markets Authority (ESMA), and global watchdog IOSCO’s Fintech Task Force.
The WFE expressed particular alarm at the number of crypto platforms and brokers offering these products, stating, “These products are marketed as stock tokens or the equivalent to stocks when they are not.” While firms like Coinbase and Robinhood are pushing into this nascent sector, proponents argue that tokenised equities can reduce trading costs, accelerate settlement times, and enable 24/7 trading. However, the WFE contends that they “mimic” equities without providing investors with the same shareholder rights or the critical trading safeguards found in regulated markets.
Beyond investor risk, the federation warned that the companies whose stocks are being replicated could suffer reputational damage if the associated tokens were to fail. WFE CEO Nandini Sukumar confirmed that this position reflects widespread concerns within the broader financial sector, noting that some publicly traded companies have already expressed their worries to their home exchanges.
In its call to action, the WFE is pressing regulators to apply existing securities rules firmly to these tokenised assets. The group’s recommendations include clarifying the legal frameworks governing ownership and custody of these tokens and implementing strict measures to prevent them from being marketed as equivalent to genuine stocks.
