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.