A surge in tokenized stocks is reshaping financial markets—but regulators and traditional investors warn of risks to market stability and investor protections.
- Companies like Robinhood, Gemini, Kraken, Coinbase, and Dinari are offering tokens pegged to stocks such as Nvidia (NVDA) and Tesla (TSLA).
- Some tokens are backed 1:1 by actual shares, others provide economic exposure via derivatives, often without voting rights, dividends, or traditional ownership protections.
- Critics warn tokenized shares could fragment liquidity and shift risks to investors, with legal frameworks like MiFID and proposed SEC exemptions being insufficient for oversight.
- Advocates argue that properly structured tokens with 1:1 collateralization and full disclosure can enhance liquidity and accessibility while maintaining core protections.
“Just because a security is represented on blockchain doesn’t change the core investor protections,” says Peter Ryan, SIFMA.
As interest grows, the debate is heating up over whether tokenization should follow traditional securities rules or new crypto-friendly frameworks.