The Securities Transfer Association (STA) is asking the U.S. Securities and Exchange Commission to favor issuer-approved tokenized securities as regulators begin shaping rules for blockchain-based versions of traditional assets.
With financial institutions and crypto firms racing to bring stocks, bonds, and other securities onto blockchain networks, regulators are facing a critical question: should tokenized assets represent direct ownership approved by the issuing company, or should third-party platforms be allowed to create digital versions of securities?
The STA, which represents transfer agents and includes major Wall Street firms among its members, submitted a letter urging the SEC to establish a clear regulatory divide between issuer-sponsored tokenized securities and third-party token products.
The group argued that tokenized shares should be genuine securities authorized by the issuing company and recorded in its official shareholder registry. In contrast, tokens created by outside platforms may expose investors to additional risks, including custody issues, operational failures, counterparty exposure, and dependence on the platform provider.
According to the STA, issuer-backed tokenization could offer significant benefits to companies, investors, and U.S. capital markets, but only if regulators establish the correct framework from the start.
The debate centers on one of the most important issues in the future of tokenized finance: determining the legal foundation behind blockchain-based stocks as traditional financial institutions and crypto companies expand their digital asset strategies.
Tokenization has quickly become one of the fastest-growing areas in digital assets, attracting attention from asset managers, brokerages, and blockchain firms. Supporters say blockchain technology could improve market efficiency by enabling faster settlement, round-the-clock trading, and easier integration of securities into digital financial systems.
Some major financial institutions expect tokenized markets to grow significantly. Citigroup has estimated that tokenized securities could reach $5.5 trillion by 2030, with tokenized equities representing a major share of that market.
Different Tokenization Models Take Shape
Transfer agents play a central role in traditional financial markets by maintaining shareholder records, processing ownership transfers, managing corporate actions, and confirming legal ownership of securities.
As tokenization has developed, several different structures have emerged.
Under the issuer-sponsored model, companies directly approve tokenized shares and record ownership in their official shareholder systems. This approach gives investors rights similar to those attached to conventional stock ownership.
Third-party tokenization models rely on intermediaries. In custodial structures, a regulated entity holds the underlying shares and issues blockchain tokens representing ownership interests. Synthetic models, meanwhile, provide exposure to stock price movements without granting direct ownership of the underlying shares.
The SEC previously recognized these distinctions in a January staff statement on tokenized securities. The agency separated third-party tokenization into custodial tokenized securities and synthetic products, noting that different structures may provide different levels of investor protection and rights.
The current tokenized stock market, estimated at about $2 billion, is mostly dominated by third-party synthetic models, including offerings from Ondo Finance and Kraken’s xStocks. These products generally remain unavailable to U.S. retail investors.
Meanwhile, companies such as Figure and Securitize have issued their own shares directly on blockchain networks using issuer-sponsored structures.
Dinari has followed a custodial approach and became the first U.S. tokenized equity platform to receive broker-dealer registration. Ondo has also moved toward a custodial structure through its licensed transfer agent and collaboration with Broadridge Financial Solutions for shareholder communications, proxy voting, and regulatory reporting.
STA Calls for Stronger Issuer Oversight
The STA wants the SEC to create a regulatory framework that clearly separates issuer-backed tokenized securities from third-party stock tokens.
The group argued that digital shares should only be considered true tokenized securities if they are authorized by the issuing company and reflected in official ownership records.
It warned that third-party token models could confuse investors, weaken shareholder rights, and introduce additional risks related to custody, platform operations, and legal ownership.
The STA recommended that any future SEC innovation exemptions, pilot programs, or permanent rules apply only to issuer-sponsored tokenization models. It also urged regulators to require company approval before platforms market products as tokenized versions of publicly traded shares.
Executives at Computershare supported the proposal, saying regulators must ensure that innovation develops alongside investor protections and market integrity.
The firm emphasized the importance of distinguishing between authentic issuer-backed tokenized securities and products that simply provide exposure to stock prices.
Equiniti also supported the STA’s position, arguing that tokens not approved by issuers and recorded through transfer agents should be treated as synthetic financial instruments rather than true tokenized shares.
The STA also called for improvements to the Direct Registration System (DRS), saying the current process for transferring securities between broker-controlled accounts and transfer-agent records is too slow for blockchain-powered markets.
The organization urged regulators to work with transfer agents and the Depository Trust & Clearing Corporation (DTCC) to modernize settlement infrastructure as digital securities adoption grows.
Tokenized Equity Debate Gains Momentum
Concerns over synthetic stock tokens have increased as more financial platforms launch blockchain-based equity products.
A previous dispute involving OpenAI and a tokenized product linked to its shares highlighted the risks of creating digital assets without direct approval from the underlying company.
The discussion is expected to intensify as major institutions expand tokenization initiatives.
Coinbase has announced plans to introduce tokenized U.S. stocks, while Robinhood has expanded its stock token offering to users worldwide.
Nasdaq has received SEC approval to explore tokenized securities trading and partnered with Kraken to distribute tokenized stocks internationally. The New York Stock Exchange has also partnered with Securitize to build infrastructure for tokenized securities.
The DTCC is preparing to test its own tokenized securities platform, designed to allow blockchain-based versions of traditional assets while preserving existing ownership rights and legal protections.
Industry Leaders Debate the Future Model
Some experts believe blockchain can modernize transfer-agent systems without replacing their role in verifying ownership.
Joris Delanoue, CEO of Fairmint, said blockchain can make securities records faster, programmable, and globally accessible, but the issuer-authorized shareholder registry should remain the legal source of ownership.
Securitize CEO Carlos Domingo argued that synthetic tokens could create additional market fragmentation and investor confusion. He said regulators should clearly distinguish between true tokenized ownership and products that only track asset prices.
However, some industry participants believe multiple compliant tokenization models can coexist.
Gabe Otte, CEO of Dinari, said many STA concerns are focused mainly on synthetic products and should not apply equally to regulated custodial models. He argued that both issuer-sponsored and custodial structures can provide genuine ownership rights.
Alan Konevsky, CEO of tZERO, said issuer-backed tokenization offers clear advantages but expects different compliant approaches to emerge as the market develops.
Eli Cohen, chief legal officer at Centrifuge, suggested the STA’s position also reflects concerns about protecting the traditional transfer-agent industry as blockchain-based alternatives gain adoption.
He added that modernizing existing systems will be essential if traditional financial infrastructure is to compete with faster blockchain-based solutions.
The SEC has not yet introduced formal regulations specifically for tokenized securities. The agency is expected to develop an innovation framework, but details regarding timing and scope remain unclear.
As Wall Street firms, brokerages, and crypto companies continue building tokenized asset platforms, the SEC’s regulatory decisions will play a major role in determining how blockchain-based equities develop and what rights investors ultimately receive.
