A global race among crypto firms to issue tokenized stocks is raising red flags as experts warn about investor protection gaps, legal uncertainty, and market stability risks.
The crypto industry is accelerating efforts to tokenize traditional stocks, igniting both excitement and alarm within global financial circles.
According to a recent Reuters report (Oct 8), crypto platforms are launching stock-backed tokens — blockchain-based digital instruments that mirror the price of traditional equities — in a bid to revolutionize the way global investors trade.
Fueled by President Donald Trump’s pro-crypto stance and his administration’s push for friendlier regulations, major players like Robinhood, Gemini, and Kraken have rolled out tokenized shares in Europe. Meanwhile, Coinbase, Robinhood, and startup Dinari are seeking approval to bring similar offerings to the U.S.
In a symbolic move, Nasdaq last month became the first major exchange to propose trading tokenized shares — a signal that even traditional finance is feeling the winds of change.
According to blockchain analytics firm RWA.xyz, the combined value of retail-oriented tokenized stocks surged to $412 million by September 2025, a staggering leap from only a few million dollars a year earlier.
Proponents argue that stock tokenization could redefine global equity markets, offering:
24/7 trading across borders,
Instant settlement via blockchain,
Lower transaction costs, and
Enhanced liquidity for smaller investors.
However, regulatory experts caution that these products often lack the legal rights and disclosures associated with traditional securities.
“You’re essentially buying synthetic exposure, not ownership,” said Diego Ballon Ossio, Partner at Clifford Chance (London).
“The burden falls on the investor to truly understand what they’re purchasing.”
Unlike conventional shares, most tokenized stocks don’t confer ownership, voting rights, or dividends. In many cases, the products are structured as derivatives or proxy assets, exposing investors to counterparty risk — the danger that the token issuer might default.
One of the biggest concerns is inconsistency across issuers.
Take, for instance, tokens linked to Nvidia or Tesla — multiple versions exist, each with different rights, terms, and risk profiles.
That lack of uniformity, analysts say, could confuse investors and erode market confidence.
“When different tokenized offerings carry different rights and disclosures, that’s a red flag,” said Gabriel Otte, CEO of Dinari. “It makes due diligence far more complex for everyday investors.”
While some projects claim to be fully collateralized 1:1 with underlying shares, others merely track stock prices synthetically, without holding any physical assets. This raises questions about transparency, valuation accuracy, and redemption security — especially in the absence of clear oversight.
In June, Robinhood entered the spotlight when it launched tokenized trading for public companies, and later announced plans to include private firms.
To promote its rollout, the company offered tokens pegged to OpenAI, the artificial intelligence powerhouse. Yet, under the terms and conditions, these tokens were revealed to be derivative contracts, indirectly backed by convertible note holdings via a special-purpose vehicle (SPV).
The move drew pushback from OpenAI, which denied endorsing the offering, and also prompted scrutiny from Robinhood’s European regulator.
The incident underscores a broader challenge: blurring the line between innovation and misrepresentation. Without clear legal definitions, tokenized assets could mislead retail investors into believing they own equity stakes they actually don’t.
The rapid rise of tokenized equities has left regulators racing to catch up.
While crypto advocates view tokenization as a gateway to a more open and efficient market, skeptics warn that fragmented oversight could destabilize traditional finance.
If left unchecked, the proliferation of synthetic stock tokens might dilute market integrity, distort price discovery, and fragment liquidity across unregulated trading venues.
Legal experts stress that authorities must develop clear, harmonized rules defining what constitutes a “tokenized stock” — and how investor protections, reporting standards, and liability frameworks should apply.
“It’s a balancing act,” said one compliance officer at a European exchange.
“Innovation shouldn’t outpace regulation, especially when retail money is at risk.”
Despite the concerns, few deny that tokenization is here to stay. By merging blockchain transparency with traditional market infrastructure, tokenized assets could streamline cross-border investing, reduce settlement friction, and democratize access to global equities.
But as the market expands, trust and oversight will be the key differentiators between legitimate financial innovation and speculative excess.
The next phase of this trend may see collaboration between regulated exchanges and crypto-native firms, building hybrid models that combine the efficiency of blockchain with investor safeguards of traditional markets.
Whether tokenized stocks become the future of finance or just another crypto experiment will largely depend on regulatory clarity and market discipline in the months ahead.
1. What are tokenized stocks?
Tokenized stocks are digital assets representing exposure to real-world equities. They mirror the price of underlying shares but often don’t grant ownership or voting rights.
2. Are tokenized stocks legal?
Legality varies by jurisdiction. In the U.S., most offerings are still under regulatory review, while some European markets have begun limited experimentation under sandbox programs.
3. What are the main risks for investors?
Key risks include lack of ownership rights, unclear regulation, counterparty risk, and inconsistent disclosures among issuers.
4. What’s the future outlook for stock tokenization?
Analysts expect tokenization to grow rapidly, but long-term success hinges on robust regulation, clear investor protections, and transparent product structures.
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