The group expressed alarm at the number of brokers and crypto trading platforms offering or planning to offer tokenized U.S. stocks.
Crypto News
The World Federation of Exchanges urged the SEC to reject broad regulatory relief for crypto companies launching tokenized stock offerings in a Nov. 21 letter. The group expressed alarm at the number of brokers and crypto trading platforms offering or planning to offer tokenized U.S. stocks.
These products are marketed as stock tokens or equivalent to stocks when they are not, the WFE stated. The development poses multiple and interconnected risks to investors and market integrity.
Crypto exchanges seek to offer tokenized stocks in the U.S., allowing investors to buy exposure to public companies without owning shares. The products feature faster settlements compared to traditional stock exchanges and can be traded at any time, not just during market hours.
SEC chair Paul Atkins has floated granting an exemption for crypto companies that are not SEC-registered broker-dealers. The WFE, which counts Cboe and Nasdaq as members, said it supports the SEC using exemptive relief but expressed concern that broad use of such relief presents risks.
The group stated this authority is most effective when exercised in a targeted manner. It should not be applied as a means to circumvent or fast-track exemptions to longstanding regulatory requirements. The WFE called tokenization a likely natural evolution in capital markets while maintaining a pro-innovation stance, but emphasized it must be done responsibly without putting investors or market integrity at risk.
A public rule filing to gather feedback would serve better than seeking large-scale changes with exemptive relief, the group argued. The Commission could alternatively consider creating a sandbox regime or another innovation facilitator.
The WFE urged the SEC, European Securities and Markets Authority, and International Organization of Securities Commissions for stricter oversight of tokenized stocks in August. The group argued these products lacked investor protections at the time.
Atkins, a former crypto lobbyist, stated he is considering an innovation exemption to relieve crypto firms from certain regulations. This would speed up the process of bringing crypto and blockchain products to market, helping fulfill President Trump's vision to make America the crypto capital of the planet.
Robinhood Markets began offering hundreds of tokenized stocks to European investors in June, with plans to bring the same products to the U.S. Kraken made a similar offer a month earlier. Coinbase reportedly sought SEC approval in June to offer tokenized stocks, with legal chief Paul Grewal calling it a huge priority for the crypto exchange.
Nasdaq requested a rule change with the SEC in September to allow the exchange to list tokenized stocks.
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