Crypto Firms’ Rush to Launch Stock-Linked Tokens Raises Alarm Bells Among Regulators

Core Insights - A surge in crypto firms is leading to the issuance of tokens linked to real-world stocks, raising regulatory concerns about hidden risks for investors [1][4][8] Group 1: Market Dynamics - The market for retail-focused tokenized public stocks has grown to $412 million, a significant increase from just a few million last year [4] - Major companies like Robinhood, Gemini, and Kraken are at the forefront of launching tokenized stock trading, with efforts in both Europe and the U.S. [3][8] - The tokenization of real-world assets (RWAs) could potentially unlock a $400 trillion market in traditional finance, according to research by Animoca Brands [7] Group 2: Regulatory Concerns - Regulators and Wall Street firms, including Citadel Securities, are advocating for tighter oversight of tokenization, citing risks of draining liquidity from public markets [6] - Many tokenized instruments lack the legal protections associated with traditional shares, such as ownership and voting rights, which raises concerns about counterparty risks [4][5][8] Group 3: Technological Advancements - Proponents argue that tokenization can enhance stock trading efficiency by enabling 24/7 trading and instant settlement [3][6] - Supporters of regulated tokenization, like Kraken and Ondo Finance, claim it can improve transparency and investor protection in traditional markets [6][8]