Summary
The World Federation of Exchanges (WFE) and its members are committed to advancing innovation in financial markets. New technologies, including tokenisation, have the potential to improve efficiency, transparency, and investor access when developed and deployed responsibly.
However, the emergence of unregulated platforms offering so-called tokenised equities raises serious concerns. These offerings often bypass established safeguards, creating risks for investors, undermining market integrity, and enabling regulatory arbitrage.
We refer to these products as 'mimics' because even though they're marketed as stock tokens and may seem like stocks, they are not stocks. It is not entirely clear what their legal status is across all jurisdictions, but we believe they're considered derivatives in Europe.
This paper sets out the WFE’s position on these developments, distinguishes genuine innovation from harmful imitation, and outlines key policy recommendations to ensure markets remain fair, transparent, and well-regulated.
To uphold the integrity of global capital markets, we propose the following regulatory actions:
- Affirm the Principle of Technological Neutrality: Regulatory standards must apply consistently, irrespective of the technological format in which financial instruments are issued or traded.
- Ensure Regulatory Parity: Tokenised equities and similar instruments should be subject to the same disclosure, trading, clearing, and settlement obligations as traditional securities.
- Promote Supervisory Coordination: IOSCO should enhance cross-border collaboration to prevent regulatory arbitrage and ensure coherent supervision of tokenised markets.
- Clarify Legal Frameworks: Regulators should work to resolve legal uncertainties, particularly regarding ownership, custody, and enforceability in tokenised environments.
- Prevent Marketing of Derivatives Products as Stock Equivalents: Regulators should ensure that companies cannot market products as the equivalent of stocks when they are clearly not.
