The World Federation of Exchanges (WFE), representing global stock exchanges, has issued a stark warning to regulators regarding the proliferation of "tokenized stocks." The organization asserts that these digital offerings are mere "copycats" lacking the fundamental rights and protections afforded to traditional shareholders, posing significant threats to market integrity and investor safety.
The Peril of "Mimic" Products
The WFE critically labels tokenized stocks as derivatives and "mimics" that operate in regulatory grey areas, effectively bypassing established safeguards designed to protect investors. Their primary concern is that these products do not confer the same ownership rights as conventional equities, yet they can mislead retail investors into believing they possess such rights. This fundamental misrepresentation, according to the WFE, creates unacceptable risks, particularly for less sophisticated market participants who may be unknowingly exposed to unregulated financial instruments.
Undermining Market Integrity and Investor Protection
Beyond individual investor risk, the WFE argues that the unchecked growth of tokenized stocks threatens the broader market ecosystem. These offerings, traded outside regulated venues, could lead to fragmented liquidity and divert essential order flow from established exchanges, ultimately working against the best interests of investors. The Federation emphasizes that while it supports innovation, it firmly expects all new financial products, including tokenized stocks, to meet the same rigorous oversight standards as traditional exchanges. They view the current landscape as a "blatant attempt to circumvent regulation," urging regulators to act decisively to ensure that technological advancements do not become a facade for increased risk and opacity, with investor protection remaining paramount.
