SEC Joins Global Regulators in Combating Tokenized Stocks

Global regulatory collaboration: Tokenized stocks face challenges

The European Securities and Markets Authority (ESMA), the International Organization of Securities Commissions (IOSCO), and the World Federation of Exchanges (WFE) have written to the U.S. Securities and Exchange Commission’s (SEC) cryptocurrency task force, calling for stricter regulation of tokenized stocks.
These institutions bluntly stated that tokenized stocks are not true equity, but rather digital products that "mimic" traditional stocks and lack investor protections. The WFE stated: "We are concerned that a large number of brokers and cryptocurrency trading platforms are promoting so-called tokenized US stocks by packaging them as equivalent to stocks, which is not the case."

Investor Sentiment: Efficiency Allure vs. Compliance Concerns

According to RWA.xyz data, the total amount of tokenized assets has exceeded US$26 billion. Although tokenized stocks only account for a small part of it, their market influence is rapidly expanding due to the participation of giants such as Coinbase, Kraken, and Robinhood.
Investors have mixed feelings about tokenization:

• Optimists believe that the high efficiency, low cost and global market access brought by blockchain are important advancements in the financial system.

• Cautious groups worry that if regulations are tightened too much, investment channels will be restricted, and may even lead to investment losses or market fluctuations.

“These products are advertised as equity tokens or commodities equivalent to stocks, but this is not the case.” Source: Jevgenijs Kazanins

Policy background and industry competition

This action is not an isolated case. The GENIUS Stablecoin Act, previously under review in the United States, ultimately prohibited stablecoin issuers from offering returns due to lobbying by banking groups, thus protecting the competitive advantage of traditional money market funds. Temujin Louie, CEO of the cross-chain protocol Wanchain, noted, "This provision effectively limits the space for innovation."
This reflects the deep influence of traditional financial groups on key legislative and regulatory agendas, and tokenized stocks may face similar challenges.

Disagreements within the SEC and a window of opportunity

It's worth noting that the SEC isn't entirely monolithic. In July of this year, SEC Chairman Paul Atkins publicly stated that tokenization is an innovation worth promoting. That same month, SEC Commissioner Hester Peirce emphasized that tokenized securities must comply with existing securities laws.
This shows that in the context of tightening regulations, tokenization may still have room for development within a compliance framework.

Investor advice: calm consideration and neutral guidance

For average investors, tokenized stocks offer both promise and hidden risks. On the one hand, focusing on products launched by leading compliant platforms may make tokenization a useful complement to traditional stock investments. On the other hand, tokenized products lacking regulatory safeguards often come with risks of opacity and excessive publicity, and blindly chasing high returns can lead to uncontrollable losses. A more prudent approach is to view tokenized stocks as an exploratory asset allocation tool, maintaining a low exposure and closely monitoring developments from global regulators like the SEC and ESMA to strike a balance between opportunities and risks.

The future of tokenized stocks is still unclear, and the game between regulation and innovation has just begun.
Investors need to remain rational, pay attention to compliance information, and make prudent allocations to find a balance between risks and opportunities.

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Further reading

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