The Securities Transfer Association (STA) is calling on the U.S. Securities and Exchange Commission to give priority to issuer-approved tokenized securities as regulators work on rules for bringing traditional financial assets onto blockchain networks.
As Wall Street firms and crypto companies accelerate efforts to tokenize stocks and other securities, regulators are facing a key question: should blockchain-based assets represent direct ownership from the issuing company, or can third-party platforms create acceptable digital versions of those assets?
The STA, a trade organization representing transfer agents and their members, including major financial institutions, submitted a letter urging the SEC to establish a clear distinction between issuer-backed tokenized securities and tokens created by outside platforms.
The group argued that tokenized shares should be actual securities authorized by the company issuing them and recorded in official shareholder records. According to the STA, tokens created by unrelated intermediaries could expose investors to additional risks involving custody, creditworthiness, operations, and platform dependency.
The association said issuer-sponsored tokenization could deliver significant advantages for companies, investors, and U.S. capital markets, but only if regulators create the right legal foundation before adoption expands.
The debate highlights one of the biggest challenges facing tokenized finance: determining the legal structure that should support blockchain-based stocks as traditional financial institutions move deeper into digital markets.
Tokenization has become one of the most closely watched areas in crypto, attracting interest from asset managers, brokerages, and blockchain companies. Supporters argue that blockchain technology could improve securities settlement, enable 24/7 trading, reduce friction, and make financial markets more efficient.
Some financial institutions expect the sector to grow substantially. Citigroup has projected that tokenized securities could become a $5.5 trillion market by 2030, with tokenized equities accounting for a significant portion of that growth.
Competing Tokenization Structures
Transfer agents are a crucial part of traditional securities markets because they maintain official ownership records, process shareholder transfers, manage corporate actions, and verify legal ownership.
As blockchain-based securities have developed, several tokenization models have emerged.
The issuer-sponsored model allows companies to authorize tokenized shares directly and record them in their shareholder registry. Investors receive ownership rights similar to those attached to traditional shares.
Third-party models rely on external platforms. In custodial structures, a regulated entity holds the underlying shares and issues blockchain tokens representing ownership interests. Synthetic models, meanwhile, provide exposure to a stock’s price without giving investors direct ownership of the underlying security.
The SEC addressed these differences in a January staff statement on tokenized securities, separating third-party approaches into custodial tokenized securities and synthetic products. While the statement was not formal regulatory guidance, it provided insight into how agency officials are evaluating different structures.
The current tokenized stock market, valued at roughly $2 billion, is largely dominated by third-party synthetic models, including products from Ondo Finance and Kraken’s xStocks. These offerings remain mostly unavailable to U.S. retail investors.
Meanwhile, firms such as Figure and Securitize have issued company shares directly on blockchain networks through issuer-sponsored structures.
Dinari has pursued a custodial approach and became the first U.S. tokenized equity platform to obtain broker-dealer registration. Ondo has also moved toward a custodial structure through its licensed transfer agent and partnership with Broadridge Financial Solutions for shareholder communications and regulatory services.
STA Pushes for Issuer-Based Framework
The STA is asking regulators to create a regulatory framework that clearly favors issuer-sponsored tokenized securities over third-party stock tokens.
The organization argued that tokenized shares should only qualify as securities if they are approved by the issuing company and entered into official shareholder records.
It warned that third-party token products could create uncertainty for investors, weaken shareholder rights, and increase exposure to intermediary risks.
The group called on the SEC to ensure that any future exemptions, pilot programs, or permanent rules for tokenized securities apply only to issuer-backed models. It also recommended requiring issuer approval before platforms advertise digital products as tokenized versions of public company shares.
Executives at Computershare supported the STA’s position, arguing that regulators must ensure innovation does not come at the expense of market integrity.
The company said tokenization should maintain a clear separation between genuine issuer-authorized securities and products that simply replicate stock exposure.
Equiniti also backed the proposal, arguing that tokens without issuer approval and transfer-agent registration should not be considered true tokenized shares.
The STA additionally urged regulators to modernize the Direct Registration System (DRS), saying the current process for moving securities between broker accounts and transfer-agent records is too slow for blockchain-based markets.
The group called for cooperation between regulators, transfer agents, and the Depository Trust & Clearing Corporation (DTCC) to improve settlement systems for digital securities.
Tokenized Stock Market Faces Greater Scrutiny
The debate over synthetic stock tokens has gained attention as more financial platforms introduce blockchain-based equity products.
A previous dispute involving OpenAI and a tokenized product connected to its shares highlighted the risks of creating digital representations without approval from the underlying company.
The issue is expected to become increasingly important as major financial firms expand their tokenization strategies.
Coinbase has announced plans to offer tokenized U.S. stocks, while Robinhood has expanded its stock token offerings internationally.
Nasdaq has received regulatory approval to explore tokenized securities trading and partnered with Kraken to distribute tokenized stocks globally. The New York Stock Exchange has also partnered with Securitize to develop tokenized securities infrastructure.
The DTCC is preparing to test a blockchain-based securities platform designed to preserve traditional ownership rights while improving efficiency through digital technology.
Industry Debate Continues
Some market participants believe blockchain can enhance the role of transfer agents rather than replace them.
Joris Delanoue, CEO of Fairmint, said blockchain technology can make ownership records programmable, faster, and globally accessible, but legal ownership should continue to rely on issuer-approved shareholder registries.
Securitize CEO Carlos Domingo warned that synthetic tokens could increase market fragmentation and create confusion among investors. He argued that regulators should clearly separate genuine tokenized ownership from products that only provide exposure to asset prices.
However, other industry leaders believe regulators should recognize multiple valid tokenization models.
Gabe Otte, CEO of Dinari, said many of the STA’s concerns apply mainly to synthetic products rather than regulated custodial structures. He argued that both issuer-sponsored and custodial models can provide investors with actual ownership rights.
Alan Konevsky, CEO of tZERO, said issuer-backed tokenization provides important benefits but expects several compliant approaches to emerge as the market develops.
Eli Cohen, chief legal officer at Centrifuge, suggested the STA’s proposal also reflects concerns about protecting the traditional transfer-agent business model as blockchain alternatives gain traction.
He said modernizing existing settlement infrastructure will be critical if traditional market participants want to compete with faster blockchain-based systems.
The SEC has yet to introduce formal rules specifically covering tokenized securities. The agency is expected to develop an innovation framework, but details on timing and scope remain uncertain.
As tokenized assets gain momentum across Wall Street and crypto markets, the SEC’s decisions on issuer-backed and third-party models will likely determine how blockchain-based equities evolve and what level of protection investors receive.
