Regulators Should Consult with Issuers on Tokenisation

Why It Matters

Without issuer input, tokenised equities could erode price discovery, inflate capital costs and expose investors to misleading products, threatening the stability of global equity markets.

Key Takeaways

• Tokenised stocks are third‑party options, not issuer‑backed shares
• Issuers face reputational risk and higher capital costs from unregulated tokens
• Lack of consultation could undermine price discovery and market liquidity
• Regulators should apply same disclosure standards to tokenised equities
• Robust regulation, not exemption, sustains global capital‑market stability

Pulse Analysis

The rapid growth of crypto‑based platforms has introduced a new class of digital assets marketed as "tokenised equities." While these tokens mimic the price movements of listed shares, they are typically issued by third parties without any coordination with the underlying companies. This disconnect raises immediate regulatory questions: should such instruments be treated like conventional securities, or do they merit a separate, lighter framework? The World Federation of Exchanges (WFE) argues that the former approach is essential to protect investors and maintain orderly markets.

From the issuer’s perspective, tokenised stocks create a cascade of risks. Because the tokens are not officially linked to the company, investors may mistakenly believe they hold genuine equity, leading to reputational damage when disputes arise. Moreover, fragmented trading in unregulated venues hampers transparent price discovery, driving up the cost of capital for issuers who rely on efficient secondary markets. Liquidity can evaporate as traders retreat to regulated exchanges that offer robust post‑trade infrastructure, leaving token markets isolated and volatile.

The WFE’s call for formal consultation with issuers underscores a broader principle: innovation thrives best within a clear, consistent regulatory environment. By applying existing disclosure and trading standards to tokenised equities, regulators can safeguard market integrity while still allowing technological advancement. This balanced approach ensures that capital‑raising remains efficient, investors stay protected, and the global equity ecosystem continues to benefit from both innovation and the proven stability of well‑regulated exchanges.