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Wall Street transfer agents urge SEC to favor issuer-sponsored tokenized shares

Created at 13 Jul · 1:51 PM1 source↑ Market-relevant
IN SHORT

A trade group representing transfer agents is asking the SEC to prioritize issuer-authorized tokenized shares over third-party stock tokens as it develops rules for blockchain-based equities. The STA warns that synthetic and other intermediary-issued tokens pose risks to investor rights and market integrity.

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Key Numbers

$5.5 trillionprojected tokenized securities market by 2030
$2.6 trillionprojected tokenized stocks market by 2030
$2 billioncurrent market of tokenized stocks
$4.7 quadrillionsecurities transactions processed by DTCC last year

Who's Involved

Securities Transfer Association (STA)
Trade group representing transfer agents urging SEC policy
Securities and Exchange Commission (SEC)
U.S. regulator developing rules for tokenized equities
Ann Bowering
CEO of issuer services at Computershare North America
Fiona Chalmers
Global CEO of issuer services at Computershare
Dan Kramer
CEO of transfer agent Equiniti
Computershare
Major transfer agent for S&P 500 companies
Equiniti
Major transfer agent in the U.S. and UK
Ondo Finance
Firm using third-party synthetic model for tokenized stocks
Kraken
Firm using third-party synthetic model for tokenized stocks
Figure
Tokenization firm using issuer-sponsored model
Securitize
Tokenization firm using issuer-sponsored model
Dinari
Firm using custodial model for tokenized equities
Broadridge
Handling proxy voting for Ondo Finance
Depository Trust & Clearing Corporation (DTCC)
Clearing and settlement utility at heart of U.S. securities markets
Wall Street transfer agents urge SEC to favor issuer-sponsored tokenized shares

↳ Why This Matters

The STA's lobbying efforts could shape the regulatory framework for tokenized securities, influencing how traditional equities are integrated into blockchain technology and potentially impacting investor protections, market integrity, and the growth of the tokenized asset market.

Key facts

  • The Securities Transfer Association (STA) is urging the SEC to favor issuer-sponsored tokenized shares over third-party stock tokens.
  • The STA argues that only issuer-authorized tokens recorded in official shareholder registers should qualify as true tokenized stock.
  • The group warns that synthetic and other third-party models can blur investor rights and add platform and custody risks.
  • The STA requested that any 'innovation exemption, pilot program, no-action position, or permanent framework' for tokenized securities should apply only to issuer-sponsored models.
  • The STA also called for modernizing the Direct Registration System (DRS) to streamline issuer-sponsored tokenization.

The Securities Transfer Association (STA), a trade group representing transfer agents, has urged the U.S. Securities and Exchange Commission (SEC) to prioritize issuer-sponsored tokenized securities over those issued by third-party intermediaries. In a letter to the SEC, the STA argued that only tokens authorized by the underlying issuer and recorded in official shareholder registers should be considered true tokenized stocks.

The STA warned that third-party token models, including custodial and synthetic structures, can introduce significant risks for investors, such as credit, custody, and operational issues, and can obscure investor rights. The group emphasized that issuer-sponsored tokens represent actual shares and maintain a direct legal relationship with the company, aligning with traditional stock ownership.

This debate comes as Wall Street and crypto firms are actively developing a market for tokenized securities, with projections suggesting it could reach $5.5 trillion by 2030. Transfer agents, responsible for maintaining shareholder records and processing ownership transfers, are central to this evolving landscape. The STA's stance aims to ensure that the foundational architecture for tokenized equities supports market integrity and clear investor protections.

Major transfer agents like Computershare and Equiniti have echoed the STA's concerns, highlighting the importance of clear distinctions between issuer-authorized tokens and "wrapper-style products." They argue that products not authorized by the issuer and recorded through its transfer agent are essentially synthetic instruments that leave investors exposed. The STA also called for modernizing the Direct Registration System (DRS) to better support issuer-sponsored tokenization in faster-paced markets.

Frequently asked questions

A transfer agent is a third-party administrator that handles the stock and bond transfers for a corporation. They maintain the official record of shareholders, process ownership changes, and manage corporate actions like dividend payments.

Issuer-sponsored tokens are authorized by the company issuing the stock and are recorded in its official shareholder register. Third-party tokens are created by intermediaries and may represent economic exposure or custodial rights to the underlying stock, but not direct ownership.

Third-party tokens can expose investors to credit, custody, and operational risks of the issuing platform, and may not provide the same direct legal rights or relationship with the issuer as traditional shares.

The Direct Registration System allows investors to hold shares directly on the company's books, rather than through a broker. The STA believes modernizing DRS is crucial for efficient issuer-sponsored tokenization.

What Happens Next

01The SEC is expected to issue further guidance or formal rules regarding tokenized securities.
02Market participants will continue to develop and launch various tokenization models.
03Further debate is anticipated regarding the distinctions between different tokenization structures.

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How It Developed

The Securities Transfer Association (STA) urged the SEC to favor issuer-sponsored tokenized securities.
The STA argued that blockchain-based shares should be authorized by the issuer and reflected in official shareholder records.
The group warned that third-party tokens can expose investors to credit, custody, and operational risks.
The STA requested that any framework for tokenized securities apply only to issuer-sponsored models.
The STA called for modernizing the Direct Registration System (DRS) to facilitate issuer-sponsored tokenization.

Sources

T1
Wall Street transfer agents lobby SEC, warning that third-party tokens pose risks to market integrityCoinDesk

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