Traditional securities transfer agents are asking the U.S. SEC to restrict tokenized stocks and ETFs, advocating only for issuer-sponsored versions. They cite risks like investor confusion and impaired governance with third-party tokens.
The push by traditional transfer agents could significantly shape the future regulatory landscape for tokenized securities, potentially limiting innovation and access for investors seeking to trade these digital representations of traditional assets.
Traditional securities transfer agents and associations are urging the U.S. Securities and Exchange Commission (SEC) to limit the scope of tokenized stocks and ETFs. While supporting innovation, these groups, including Continental Stock Transfer & Trust Company (CSTT) and the Securities Transfer Association (STA), advocate for regulations that exclusively permit issuer-sponsored tokenized securities.
In letters to the SEC's Crypto Task Force, CSTT and STA argued that only issuer-sponsored tokens represent actual securities, establishing a legal relationship between the token holder and the issuer. They expressed concerns that third-party or synthetic tokens could lead to investor confusion, inadequate disclosures, impaired issuer governance, and loss of reliable shareholder information. STA also highlighted risks such as insider trading, market abuse, sanctions compliance, and transfer control issues.
CSTT specifically urged the SEC to limit third-party stocks and ETFs from innovation exemption relief unless appropriate safeguards are implemented. The pushback comes as crypto firms like Coinbase, Kraken, and Binance expand their services to include trading of traditional financial instruments, and as pilot programs for tokenized assets involving entities like DTCC, Invesco, State Street, and BlackRock are underway.