The World Federation of Exchanges (WFE) has called on financial regulators to tighten oversight of tokenized stocks, warning that the products could expose investors to hidden risks and undermine trust in traditional markets.
Unlike conventional shares, tokenized versions allow investors to gain synthetic exposure to a company’s performance without holding legal ownership.
The WFE said this marketing approach risks confusing retail investors, who may assume they hold voting or dividend rights when they do not. If these products fail, the group cautioned, the reputational fallout could extend to listed companies, damaging broader market integrity.
The WFE urged regulators to expand securities laws to cover tokenized assets to prevent such outcomes. It recommended clarifying rules around ownership and custody while restricting the promotion of these instruments as “stock equivalents.”
The industry body outlined its concerns about the fast-growing sector in a letter to the US Securities and Exchange Commission, the European Securities and Markets Authority (ESMA), and the International Organization of Securities Commissions (IOSCO).
The WFE’s intervention comes when tokenized equities are gaining momentum across both crypto-native and mainstream platforms.
