Exchanges demand tighter control over tokenized shares
The world’s largest exchanges have called on regulators to tighten controls over tokenized shares, which are rapidly gaining demand.
Tokenized shares are digital assets issued on the blockchain that represent the right to own securities of companies. However, cryptocurrency holders are not included in the company’s shareholders, because the company’s assets formally belong to the token issuer, so coin buyers cannot count on dividends.
Proponents of tokenized shares argue that they reduce trading costs, speed up transactions, and provide the ability to buy and sell assets 24/7.
The World Federation of Exchanges (WFE), which represents 55 stock markets including giants like the New York Stock Exchange and NASDAQ, is skeptical. On August 22, it sent letters to the U.S. Securities and Exchange Commission, the European Securities and Markets Authority, and the Financial Technology Industry Task Force asking them to:
- Apply measures to ensure the security of holders of tokenized shares.
- Clarify the legal issues surrounding the ownership and custody of these assets.
- Prevent the sale of tokenized shares as assets equivalent to company securities.
We are concerned about the abundance of brokers and cryptocurrency trading platforms offering tokenized shares of US companies or intending to do so. These products are sold as tokenized shares or securities-like assets, which they are not, — the WSE representatives said.
