Investors, Beware: Tokenized Stocks Are Not What You Think

by

Crypto tokens tied to stocks? Sounds like a get-rich-quick scheme your uncle might pitch after a few too many beers. But here’s the deal: the European Union’s markets watchdog says these tokens could be misleading investors. Why? Because they don’t always offer the same perks as actual shares. So much for “ownership,” right?

Apparently, several companies are hopping on the tokenization bandwagon, creating stocks and derivatives that are “backed” by actual shares in some special purpose company. Natasha Cazenave, the executive director of the European Securities and Markets Authority (ESMA), broke it down for us during a conference in Dubrovnik, Croatia. Fancy, huh? But hold your applause – this might not be as cool as it sounds.

“These tokenized instruments are basically like a VIP pass to the stock world,” Cazenave explained, “They offer 24/7 access and can be split up into smaller chunks, but-plot twist-they usually don’t give you the right to actually, you know, vote at shareholder meetings or get those sweet, sweet dividends.”

“If these are structured as synthetic claims and not direct ownership, you could be in for a rude awakening,” Cazenave added. “Basically, don’t just take the fancy digital ticket at face value. Clear communication is key!”

And the World Federation of Exchanges? They’re not fans of these tokenized stocks either, pointing out that they don’t come with the investor protections you’d normally get from the real thing. Sounds like a recipe for disaster, right? 🤷‍♀️

Tokenized Stocks: The Illusive Dream

Despite all the hype, Cazenave mentioned that tokenized stocks are still “largely illiquid.” Translation: They’re not exactly a hot commodity. The EU has been experimenting with this technology for a while, but most of these initiatives are still small potatoes.

“These tokenized stocks are like that one friend who promises to help you move but never shows up,” Cazenave said. “They’re just sitting there, waiting for someone to care about them. The issue? They’re mostly issued privately and have no real liquidity. So much for that high-tech utopia we were promised, right?”

ESMA’s Wish List: Tech + Safety = The Dream

ESMA’s all in on new tech, but they’re being cautious. They want to explore these blockchain wonders but only with strong safeguards to protect investors and the financial system. Because, let’s face it, without proper rules, this could be a complete dumpster fire.

Oh, and if you’re thinking about diving into the world of tokenized assets, the EU’s pilot program might be your best bet. It gives firms a chance to test the waters without, you know, burning down the house. You can thank the EU’s Markets in Crypto-Assets Regulation (MiCA) for that little safety net.

Robinhood, Coinbase, and Their Tokenized Stocks Obsession

Meanwhile, across the pond in the US, Robinhood Markets has already launched tokenized stocks for EU traders (because who doesn’t love a little digital stock drama?). Of course, it hasn’t been all smooth sailing. Some companies are already raising their eyebrows, and a few EU countries are like, “Nah, we’re good.”

And if you think Robinhood’s the only one playing the game, think again! US-based Kraken jumped into the tokenized stock ring in June, but they’re keeping it exclusive – no US or EU folks allowed. Meanwhile, Coinbase is over here trying to get approval to join the party. The more, the merrier, right? Or… maybe not. 😅

Read More

2025-09-02 06:33