WFE Flags Market Integrity Threat from Tokenised Equities Amid Coinbase, Robinhood Plans

A group representing the world’s largest stock exchanges has urged regulators to tighten oversight of tokenised stocks. In a letter seen by Reuters, the World Federation of Exchanges warned that blockchain-based stock tokens pose risks to investors and could damage market integrity.

Tokenised equities are digital tokens designed to represent company shares. They allow trading but do not give investors shareholder rights in the underlying company. Despite this, several brokers and crypto platforms, including Coinbase and Robinhood, are moving into the sector.

WFE Warns Tokenised Equities Risk Investors

Supporters argue tokenised equities can reduce costs, speed up settlement, and enable trading outside market hours. However, the WFE said the products “mimic” equities without offering the same protections. It cautioned that issuers of the underlying shares could face reputational harm if token markets fail.

You may find it interesting at FinanceMagnates.com: Tokenized Stocks Mania Grows as Market Cap Soars 220% in July.

The letter, sent last Friday, was addressed to the U.S. Securities and Exchange Commission’s Crypto Task Force, the European Securities and Markets Authority, and IOSCO’s Fintech Task Force. The WFE, a UK-based industry body, said it was “alarmed” at the number of brokers and trading platforms planning to offer such products. It did not name any firms.

Robinhood, Coinbase Advance Tokenised Equity Plans

The group urged regulators to apply securities rules to tokenised assets, clarify ownership and custody frameworks, and restrict marketing that equates tokens to actual stocks.

Read More: Bitget Introduces Tokenized Stock Contracts Tied to Tesla and Nvidia.

The SEC, ESMA, and IOSCO did not respond to requests for comment. In July, an SEC commissioner stated that tokenised securities remain subject to securities laws.

Robinhood introduced tokenised equities for EU customers in June and said it would expand into tokens linked to private companies, including OpenAI. OpenAI said it was not involved and did not endorse the offering. Coinbase has also sought approval from the SEC to provide tokenised equities, according to Reuters.