Two major US share registry groups have called on the country’s top markets watchdog to clamp down on unofficial tokenised stocks and exchange-traded funds (ETFs), warning they could mislead investors and destabilise corporate shareholder records.
Continental Stock Transfer & Trust Company (CSTT) and the Securities Transfer Association (STA) have both written to the US Securities and Exchange Commission (SEC), urging it to give regulatory priority to tokenisation schemes approved by listed companies themselves – and to apply tougher scrutiny to third‐party products that mimic shares without issuer backing.
They want the SEC to draw a firm regulatory line between “issuer‐sponsored” tokens, which directly represent company shares on a blockchain, and “unaffiliated” tokens, which may only track a share price or represent an indirect interest.
Subheadline: Call for clear divide between ‘real shares’ and synthetic tokens
Under the model backed by CSTT and the STA, an issuer‐sponsored token would be a digital representation of a security that a company has formally authorised for blockchain-based issuance or trading.
In such cases, a registered transfer agent – the specialist firm that maintains official shareholder lists and processes transfers – can treat the token holder as a direct shareholder, applying the same controls used for traditional paper or electronic share registers.
By contrast, unaffiliated tokens can be created by crypto platforms or other intermediaries without a company’s consent. These may be structured to mirror a stock’s market price or to confer a claim on shares held by another party, but they typically do not establish a direct legal relationship between the token buyer and the underlying company, the STA warned.
Subheadline: Fears of investor confusion and broken shareholder records
CSTT cautioned that retail investors could easily confuse third‐party instruments with genuine equity, even though the legal and economic rights may differ markedly.
“We support innovation in the securities markets, but believe any tokenization framework must preserve investor protection, issuer authorization, accurate shareholder records, transfer controls, and market integrity,” CSTT wrote in its letter.
The firm argued that opaque ownership structures could leave token buyers unclear about who holds the underlying assets and what rights they actually enjoy – including custody arrangements, voting powers, dividend entitlement and claims in the event of insolvency.
For public companies, CSTT said proliferating unaffiliated products risk undermining the integrity of shareholder records. If issuers cannot reliably identify who owns their securities, key corporate actions such as shareholder votes, dividend distributions, tender offers, stock splits and other restructurings could be compromised.
The STA set out further concerns involving insider dealing, market manipulation, sanctions checks and the enforcement of transfer restrictions. It also highlighted the potential reputational damage when a company’s shares are used to back a tokenised product without its “knowledge or consent”.
Subheadline: SEC urged to modernise rules – but not at any cost
On the back of those risks, CSTT urged the SEC to update registration and disclosure requirements in a way that explicitly supports issuer‐authorised tokenisation programmes, while resisting the use of experimental or “innovation” exemptions to fast‐track unaffiliated stock or ETF tokens.
CSTT argued that any bespoke relief for third‐party tokens should be contingent on clear investor protections being put in place first.
The stance echoes an earlier warning from SEC Commissioner Hester Peirce, who stressed last year that the use of blockchain does not change what a product is in law.
“As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset. Tokenized securities are still securities,” Peirce wrote in a statement reported by Reuters.
She also drew a distinction between securities tokenised by issuers and products devised by unconnected platforms, saying investors in the latter could face risks that would not arise when dealing directly with an issuer or through established market infrastructure.
Subheadline: Traditional market giants push ‘regulated’ tokenisation
The intervention comes as demand for blockchain-based access to traditional financial assets continues to grow. Large crypto exchanges such as Coinbase, Kraken and Binance have launched or announced services that provide digital-asset users with exposure to stocks, ETFs and derivatives, though the structure and availability of those offerings vary by country.
At the same time, mainstream financial market operators are developing their own tokenisation projects within existing regulatory frameworks.
In March, the New York Stock Exchange (NYSE) unveiled a partnership with Securitize to build a platform for tokenised securities. Under the arrangement, Securitize acts as a digital transfer agent for participating corporate and ETF issuers, while NYSE and Securitize work together on operating and regulatory standards for digital transfer agents.
NYSE president Lynn Martin has said that any new tokenisation systems must preserve the trust, transparency and investor safeguards associated with traditional capital markets.
The SEC has also approved a Nasdaq proposal allowing certain stocks to trade and settle in tokenised form inside its exchange environment, keeping such digital shares under familiar securities rules.
Separately, the Depository Trust & Clearing Corporation (DTCC), the primary US post‐trade clearing house, has tested tokenisation using assets linked to Microsoft, stablecoin provider Circle, the Invesco QQQ Trust, State Street’s SPDR S&P 500 ETF and BlackRock’s iShares 0–3 Month Treasury Bond ETF. The pilot has spanned equities, index funds and short‐term US government debt.
Unlike synthetic tokens created without issuer involvement, these initiatives rely on regulated transfer agents, exchanges or clearing systems to maintain definitive ownership records – the type of arrangement CSTT and the STA are urging the SEC to entrench as it drafts rules for tokenised stocks and ETFs.
