Global Exchanges Urge Crackdown on Tokenized Stocks, Citing Investor Risks

The World Federation of Exchanges has issued a stark warning to regulators about the proliferation of tokenized equities, which it claims mimic traditional stocks without offering equivalent protections. In a letter to the SEC, ESMA, and IOSCO, the WFE argued these products create confusion and expose investors to undue risk.

Tokenized stocks are increasingly marketed by crypto platforms as equivalent to securities, despite lacking shareholder rights or regulatory safeguards. The WFE fears retail investors may not grasp the distinction, potentially blaming traditional exchanges if these synthetic products fail.

The regulatory push comes as blockchain-based asset tokenization gains momentum globally. While the technology promises efficiency benefits, traditional financial institutions are drawing clear boundaries between compliant securities and their crypto derivatives.