Regulators face pressure to favor issuer-backed tokenized stocks and clamp down on unaffiliated versions that could mislead investors, industry transfer agents told the SEC.
In letters to the SEC’s Crypto Task Force, Continental Stock Transfer & Trust Company (CSTT) and the Securities Transfer Association (STA) urged the agency to prioritize tokenization programs that are authorized and supported by issuers, while treating third-party “synthetic” tokens more restrictively.
Why the distinction matters
- Issuer-sponsored tokens: Authorized by the company whose securities are being tokenized, these can be recorded by transfer agents as bona fide shareholder positions and integrated with existing ownership, voting and corporate-action systems.
- Unaffiliated tokens: Created by an unrelated platform, these often only track a stock’s price or represent an indirect interest in shares held elsewhere. STA says such arrangements don’t necessarily create a legal relationship between the token holder and the issuer.
Regulators should care because unaffiliated tokens can create real risks, the letters argue:
- Investor confusion over whether tokens confer direct ownership, voting rights, dividends or insolvency claims
- Gaps in custody, disclosure and shareholder records that complicate corporate actions (voting, dividends, tender offers, splits)
- Higher potential for insider trading, market manipulation, sanction-avoidance, and transfer-restriction breaches
- Reputational harm when a company’s shares are used in token products without consent
CSTT recommended the SEC modernize registration documents to prioritize issuer-approved tokenization programs and opposed giving unaffiliated tokens relief via an “innovation” exemption unless investor protections are imposed first.
Regulatory echo and market context
The transfer agents’ call mirrors comments from SEC Commissioner Hester Peirce, who warned in July 2025 that blockchain doesn’t change the fundamental legal nature of an investment: tokenized securities are still securities. She likewise distinguished between issuer-tokenized products and third-party creations that expose investors to additional risks.
Demand for tokenized access to traditional assets continues to grow. Crypto exchanges such as Coinbase, Kraken and Binance have announced services linking digital-asset users to stocks, ETFs and derivatives, though product structures vary by jurisdiction.
At the same time, traditional market players are building regulated tokenization pathways:
- NYSE partnered with Securitize in March to develop a tokenized securities platform, with Securitize acting as a digital transfer agent and the NYSE setting operating and regulatory standards.
- The SEC approved a Nasdaq proposal that keeps tokenized shares inside an exchange-governed system under existing securities rules.
- The Depository Trust & Clearing Corporation (DTCC) has run tokenization pilots tied to assets including Microsoft, Circle, the Invesco QQQ Trust, State Street’s SPDR S&P 500 ETF and BlackRock’s iShares 0–3 Month Treasury Bond ETF.
Unlike unaffiliated synthetic tokens, these regulated initiatives maintain the transfer-agent, exchange and clearing links that preserve accurate ownership records and investor protections—exactly the connection CSTT and the STA want the SEC to preserve as it crafts rules for tokenized stocks and ETFs.
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