Traditional Exchanges Demand Stricter Regulation for Tokenized Stocks—Here’s Why It Matters

Wall Street's old guard wants tighter rules on crypto-traded stocks—and they aren't mincing words.

Tokenized equities have exploded in popularity, letting users trade fractional shares of Tesla or Apple around the clock without traditional brokers. But traditional exchanges argue these digital assets operate in a regulatory gray zone—one that could put investors at risk.

Regulators are listening. The SEC and other agencies are already scrutinizing platforms that offer tokenized stocks, concerned over custody, disclosure, and market manipulation. Exchanges want clarity—and oversight that matches conventional markets.

It’s a classic clash: innovation vs. regulation. Crypto advocates say tokenization unlocks liquidity and access; skeptics warn it’s the wild west with extra steps. One thing’s clear—the push for rules isn’t about protecting you; it’s about protecting their turf.

Reasons behind the call for regulation

Currently, various platforms - particularly outside the EU regulatory framework - enable the trading of tokenized stocks, for example on ethereum or Solana. Traditional exchanges warn, according to the source, that this undermines the conventional, heavily regulated market.

In a letter, the WFE demanded that tokenized stocks be subject to the same transparency, reporting, and security requirements as traditional exchange offerings. Without harmonization, there is a risk that token derivatives could generate profits in a regulatory grey area while leaving investors insufficiently protected.

“We are alarmed by the number of brokers and crypto trading platforms offering or intending to offer so-called tokenized US equities. These products are marketed as stock tokens or stock equivalents, but they are not.” - WFE letter to the regulator

Market dynamics, risks, and future outlook

Tokenized stocks offer faster onboarding, digital custody, and fractional ownership, opening access to new customer segments. Crypto exchanges with established digital asset users in particular seek to compete with the traditional system through such offerings.

In the US, Coinbase has already applied for SEC approval, while Robinhood and Kraken enable trading of tokenized shares in Europe. These developments exemplify the growing convergence of traditional financial structures with blockchain-based market infrastructure. The shift towards tokenized assets, on-chain yields, and decentralized infrastructure marks not only a strategic realignment of individual providers but also the transition to a globally interconnected, always-accessible financial ecosystem.