Two securities transfer groups have urged the SEC to prioritize issuer-backed tokenized stocks and ETFs while limiting unaffiliated versions that may not provide shareholders with direct ownership rights.
Summary
- Transfer agents urged the SEC to prioritize issuer-backed tokenized stocks and ETFs.
- Industry groups warned that third-party tokens may weaken ownership rights and investor protections.
- Regulated tokenization projects from NYSE, Nasdaq and DTCC continue to expand.
Continental Stock Transfer & Trust Company explained their views to the SEC’s Crypto Task Force, stating they support regulations for digital securities but believe products launched without official authorization should face stricter rules.
The company handling shareholder records supported a similar idea from the Securities Transfer Association, a group for companies that manage stock ownership. Both groups requested that the SEC clearly distinguish between digital securities issued directly by a company and those created on separate, independent platforms.
According to their idea, a token directly issued by a company is considered a type of investment that the company officially approves for use on a blockchain. This allows the transfer agent – the record keeper of who owns stock – to treat token holders like regular shareholders and apply standard ownership rules.
A token doesn’t have to be directly linked to a company; it could follow a stock’s price or represent ownership of shares held by someone else. The Securities Token Association (STA) explains that these arrangements don’t automatically create a legal connection between the person buying the token and the company behind the stock.
CSTT stated in a letter that while they encourage new ideas in the securities markets, any system for tokenizing assets needs to prioritize protecting investors, ensuring proper authorization for those issuing tokens, maintaining correct records of ownership, controlling transfers, and upholding the overall health of the market.
Issuer-backed tokens preserve shareholder rights
CSTT cautioned investors that they might accidentally think they’re buying company stock when they’re actually purchasing different types of digital tokens, which have different legal rights and benefits. The firm also pointed out that complicated ownership arrangements can result in investors not receiving important information about how their assets are held, whether they have voting power, if they’ll receive dividends, or what happens if the company fails.
CSTT explained that for publicly traded companies, products not directly connected to the company could create problems with keeping track of who owns the stock. This could make it hard to accurately identify shareholders and impact important processes like voting, dividend payments, and stock splits.
The STA raised new issues regarding illegal trading practices, attempts to artificially influence market prices, failures to check against sanctions lists, and restrictions on transferring assets. They also warned that a company’s reputation could suffer if its stock is used in digital products without its permission.
Considering these potential risks, CSTT requested the SEC to update its registration process to prioritize tokenization programs directly authorized by companies. They also argued against allowing tokens of stocks and ETFs from outside parties to benefit from relaxed rules unless the SEC first establishes protections for investors.
This idea is similar to a warning issued in July 2025 by SEC Commissioner Hester Peirce, who pointed out that using blockchain technology doesn’t change how the law views an investment.
Even though blockchain is a strong technology, it can’t fundamentally change what an asset *is*. Just because something is represented as a token on a blockchain doesn’t mean it’s not still subject to the same rules and regulations as the original asset, according to Commissioner Peirce.
Peirce highlighted a difference between digital securities issued by companies themselves and those created by other, independent parties. The commissioner warned that investors in these third-party versions could encounter risks not present when buying shares directly from the company or using traditional financial systems.
Regulated platforms are advancing tokenized trading
More and more people are looking to use blockchain technology to access investments like stocks, ETFs, and derivatives. Crypto exchanges such as Coinbase, Kraken, and Binance are responding by offering these types of traditional financial products, though exactly what’s available varies depending on the location.
Even established financial markets are exploring tokenization using secure, regulated systems. For example, in March, the New York Stock Exchange teamed up with Securitize to create a platform for trading tokenized stocks and ETFs. Securitize will handle the digital transfer of ownership for companies and ETF issuers participating in the platform.
NYSE and Securitize are working together to create rules and guidelines for companies that handle the digital transfer of ownership for assets. According to NYSE President Lynn Martin, these new systems need to maintain the same level of trust, openness, and safeguards investors currently expect from traditional financial markets.
The Securities and Exchange Commission (SEC) gave the green light to a plan from Nasdaq that would let some stocks be bought, sold, and finalized using digital tokens. This system would keep those tokenized shares managed within the exchange itself, following current securities regulations.
The Depository Trust & Clearing Corporation (DTCC) has been testing how to use tokenization with investments like Microsoft stock, Circle’s digital currency, the Invesco QQQ Trust, State Street’s SPDR S&P 500 ETF, and BlackRock’s short-term Treasury bond ETF. This testing included stocks, various index funds, and short-term government bonds.
These carefully managed digital tokens differ from those created without oversight because they use standard financial systems – like transfer agents, stock exchanges, or clearinghouses – to keep track of who owns them. The groups behind these tokens, CSTT and the STA, have requested that the SEC continue requiring this level of record-keeping as it creates new rules for digital stocks and exchange-traded funds (ETFs).
2026-07-22 22:53