Securities Transfer Association warns SEC on third-party stock tokens as market nears $2 billion

The Securities Transfer Association urged the SEC to favor issuer-authorized tokenized stocks in any exemptions, pilot programs or long-term regulatory framework, arguing that third-party stock tokens could undermine market integrity and leave investors unclear about their legal rights. In its comment letter, the group said tokenized shares should be authorized by issuers and reflected on official shareholder registers rather than existing outside established ownership systems. It also warned that third-party structures could introduce custody, operational and counterparty risks. The association said the roughly $2 billion global tokenized stock market is still dominated by third-party offerings such as Ondo Finance and Kraken xStocks, while Figure and Securitize use issuer-authorized models. It also called for reforms to DRS and closer coordination with DTCC, underscoring a central policy question for tokenized equities: whether blockchain-based share representations can fit within existing investor-protection and settlement frameworks without creating confusion over who legally owns the underlying stock.