The Securities Transfer Association (STA) has submitted a comment letter to the U.S. Securities and Exchange Commission, warning that stock tokens issued by third parties could weaken market integrity and urging regulators to give priority to tokenized securities authorized by listed companies, according to CoinDesk.
STA says tokenized shares should come from the issuer
The association, which represents multiple Wall Street transfer agents, said a genuine tokenized stock should be formally authorized by the issuing company and recorded on the official shareholder register. It said that structure is different from "wrapped" token products created by independent platforms.
STA argued that third-party stock tokens could confuse investors about the rights they actually hold. It also said investors could be exposed to platform credit, custody, and operational risks, without forming a direct legal relationship with the listed company.
Comment letter pushes for issuer-backed framework
On that basis, the group said any innovation exemption, pilot program, or permanent regulatory framework for tokenized securities should first apply to issuer-backed models.
STA also called on the SEC to reform the current Direct Registration System, or DRS. The group said the existing U.S. securities custody system is not well suited to the real-time transfer and settlement requirements of on-chain securities, and it recommended that regulators work with the Depository Trust & Clearing Corporation, or DTCC, to improve digital securities infrastructure.
Third-party stock token models still lead the market
The global market for tokenized stocks is currently about $2 billion and is still led mainly by third-party models. CoinDesk's report cited products from Ondo Finance and Kraken, while Securitize and Figure were identified as examples of the issuer-authorized approach.