The World Federation of Exchanges (WFE) has sounded the alarm over tokenised stocks, cautioning regulators in the U.S. and Europe to act before risks spiral out of control. In a letter sent to the U.S. Securities and Exchange Commission (SEC), the European Securities and Markets Authority (ESMA), and the International Organisation of Securities Commissions (IOSCO), the UK-based body representing the world’s largest exchanges warned that the unchecked growth of tokenised equities could undermine investor trust and market stability.
The alert comes as crypto platforms accelerate their push into tokenised equity products. Robinhood recently unveiled tokenised stock trading in Europe, while Coinbase is reportedly seeking approval to roll out similar offerings in the U.S. Advocates say these tokens offer clear advantages—such as 24/7 trading, faster settlement, and easier access through fractional ownership. But according to the WFE, these benefits mask significant risks, particularly around investor protection and the authenticity of the products being sold.
The WFE’s core concern is that tokenised shares are being promoted as if they carry the same rights and protections as traditional stocks, when in reality they do not. “We are alarmed at the proliferation of brokers and platforms offering so-called tokenised U.S. stocks,” the letter stated, stressing the potential for investors to be misled.
WFE CEO Nandini Sukumar emphasized that issuers themselves are uneasy about the trend, with some companies voicing concerns about the reputational fallout of seeing their shares mirrored in unregulated crypto markets. The group is urging regulators to establish clear rules on ownership rights, custody obligations, and securities law compliance before the market expands further.
The concerns echo warnings already issued by regulators. SEC Commissioner Hester Peirce has reiterated that tokenised securities fall under existing securities laws, while the SEC’s dedicated Crypto Task Force continues to monitor the space closely. European regulators are facing similar pressure as tokenisation pilots increase across exchanges and trading platforms.
The tension became clear earlier this year when Robinhood’s European tokenised stock rollout coincided with OpenAI distancing itself from related offerings. The episode highlighted how unresolved legal and reputational risks could complicate adoption.
While tokenised equities promise to lower barriers to entry and democratize access to global markets, the WFE argues that without firm regulatory safeguards, investors could face confusion—or outright fraud. The debate now centres on whether regulators can strike a balance between encouraging innovation and preserving the trust that underpins global capital markets.
