The battle over how to regulate the next generation of financial products has intensified in Washington. According to multiple reports, the SEC is exploring ways to allow crypto-native firms to issue “tokenized” stocks—digital tokens that track the price of listed companies—while granting them limited exemptions from the full weight of securities regulation.
In response, the World Federation of Exchanges (WFE), which represents dozens of stock exchanges worldwide, has mounted a coordinated pushback. In a letter sent this week, the group argues that carving out special treatment for crypto platforms would undermine a century’s worth of investor-protection rules.
The core worry is simple: if tokenized stocks look and behave like securities, then they should be regulated as securities. Exchanges say lighter-touch rules could invite opaque pricing, inadequate custody safeguards and new avenues for market manipulation. Retail investors might not fully understand whether they are buying a regulated share, a derivative, or a synthetic exposure created offshore.
Critics also note that many tokenized-asset schemes operate 24/7 and across borders, making it harder for regulators to monitor trading patterns or halt abuses. Allowing such instruments to proliferate without robust oversight, they say, risks fragmenting liquidity and damaging confidence in public markets.
Supporters of tokenization counter that blockchain rails can cut settlement costs and make fractional investing easier, particularly for younger investors. They argue that a tailored rule set is needed to avoid smothering innovation. For now, the SEC has not finalized any exemption framework, and the public debate from exchanges shows that the eventual rules will be closely scrutinized across global markets.