Wall Street, SEC Clash Over Rules Governing Tokenized Stocks
Quick Reads:
- The Securities Transfer Association wants the SEC to treat issuer-authorized tokenized securities as the only “real” tokenized stock
- Third-party synthetic and custodial tokens dominate today’s roughly $2 billion tokenized stock market
- Citi projects tokenized securities could hit $5.5 trillion by 2030
- Coinbase, Robinhood, Nasdaq and NYSE are all racing to launch tokenized equity products
- Not everyone agrees with the STA’s stance, with some firms warning against lumping all third-party models together
Wall Street’s transfer agents are drawing a line in the sand over how stocks should move onto blockchains, and they want the SEC to draw it too.
The Securities Transfer Association (STA), a trade group representing the firms that maintain official shareholder records for public companies, has formally asked the Securities and Exchange Commission to grant preferential treatment to issuer-sponsored tokenized securities over stock tokens created by third-party platforms. The move signals that the fight over tokenized securities is no longer just a competition between crypto firms and traditional finance, it’s now a full-blown regulatory lobbying battle.
In a letter sent to the SEC, the STA argued that only tokens authorized by the issuing company and recorded in its official shareholder register should count as genuine tokenized securities. Anything else, the group warned, exposes investors to platform, custody and counterparty risks without giving them a real legal claim on the underlying company.
“An Issuer-Sponsored Token is an actual share or other security of the Corporation,” the letter stated, drawing a sharp contrast with tokens issued by intermediaries that merely track a stock’s price or represent custodial claims.
The timing of the push is no accident. Tokenized securities have become one of the hottest corners of digital finance, with Citi projecting the market could balloon to $5.5 trillion by 2030, including $2.6 trillion in tokenized stocks alone. Major players including Coinbase, Robinhood, Nasdaq and the New York Stock Exchange are all racing to build tokenized equity products, while the DTCC prepares to test its own tokenized securities platform this month.
Right now, most of the roughly $2 billion tokenized stock market runs on third-party synthetic models, led by platforms like Ondo Finance and Kraken’s xStocks, which remain largely off-limits to U.S. retail investors. Companies like Figure and Securitize have taken the issuer-sponsored route instead, issuing their own shares directly onchain.
The STA’s letter also called for modernizing the Direct Registration System, arguing that today’s process for transferring shares between broker accounts and transfer-agent records is too slow to compete with faster-moving synthetic token markets.
Not everyone in the industry agrees with the STA’s framing. Dinari CEO Gabe Otte pushed back, arguing that custodial tokenization models, which preserve real ownership rights, shouldn’t be grouped with synthetic products that offer only price exposure. Others, including Centrifuge’s chief legal officer Eli Cohen, suggested the STA’s push is also about self-preservation, since transfer agents earn fees from issuers and could lose relevance if third-party token models take off.
The debate follows a high-profile controversy last year when OpenAI publicly disavowed a Robinhood tokenized product tied to its shares, highlighting how confusing unauthorized tokenized securities can be for investors when the underlying company has no involvement.
With the SEC yet to propose formal rules on tokenized securities, how regulators ultimately treat issuer-sponsored versus third-party tokens could determine the shape of the entire tokenized stock market in the years ahead.
