Global Stock Exchanges Push Back on Coinbase, Robinhood’s Tokenized Stock Plans

Stock exchanges worldwide have urged regulators to tighten rules on tokenized stocks, warning that the products pose risks to investors and threaten market stability. The World Federation of Exchanges (WFE), which represents leading stock exchanges and clearing houses, raised the alarm in a letter to regulators.

Global Exchanges Body Warns Against ‘Misleading’ Tokenized Stocks

The letter, seen by Reuters, was sent 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 said tokenized stocks mimic traditional shares but fail to provide the same rights or protections. It argued that investors could mistakenly believe they are shareholders when in fact they are not.

Tokenized equities are blockchain-based tokens designed to represent ownership of company shares. They have gained traction as brokers and crypto platforms attempt to merge digital assets with traditional finance. Robinhood and Coinbase are among those exploring tokenized equities to expand their customer offerings. Kraken has also moved in this space, recently expanding its tokenized US equities xStocks offering to Binance Chain

Proponents claim the products can cut trading costs, speed up settlement and allow trading around the clock. However, the WFE warned that the risks outweigh the benefits if tokenized stocks are marketed without safeguards. The industry group said issuers of traditional shares could face reputational damage if tokenized products linked to their stock collapse. It also noted that many brokers promote tokenized stocks as if they were equivalent to traditional shares, which they are not.

The association urged regulators to apply existing securities rules to tokenized products, strengthen frameworks for ownership and custody, and prevent misleading marketing. WFE chief executive Nandini Sukumar told Reuters that some issuers had voiced concerns directly to exchanges, underlining the scale of unease in the financial sector.

SEC Stance Backs Exchanges as Crypto Firms Push Tokenized Equity Plans

The SEC and IOSCO did not immediately comment, while ESMA declined to respond. In July, an SEC commissioner stressed that tokenized stocks must still comply with U.S. securities law. That stance echoes the concerns now raised by the world’s largest exchanges.

In recent months, Robinhood launched tokenized stocks in Europe and announced plans to offer tokens representing shares in private firms such as OpenAI. OpenAI said it did not endorse the offering and was not involved. Coinbase has also sought SEC approval to launch tokenized equities for U.S. customers.

The debate highlights a growing battle between innovation and regulation. Tokenization is a good development but regulators and exchanges must make it clear that investor protections must come first.