Crypto tokens tied to the value of stocks can deceive investors because they do not usually give the same rights to holdrs as a direct shareholder, says the European Union market regulator.
Many companies have Tokenized Stocks and derivatives supported by shares they represent to be held at a special goal company, European Securities and Markets Authority (ESMA) Executive Director Natasha Cazenave Says At a conference in Dubrovnik, Croatia on Monday.
“These tokenized instruments can provide constant access and fractionalization but usually do not give shareholder rights,” he said.
“If structured as synthetic claims rather than directly owned, it can create a certain risk of investor misunderstandings and outlines the need for clear communication and care.”
THE WORLD FEDERATION OF EXCHANGE Late last month Global Securities regulators, including ESMA, are urged to break intokenized stocks, focusing that they lack investor protections developed in the actual property they monitor.
Tokenized stocks are “mainly not good”
Cazenave said the EU “took a leading role” in the tokenizing owners, with initiatives and pilots until 2019 by investing bloc and German financial ministry.
He added that demonstrations have shown tokenization, in which the property is represented in a blockchain, can “expand access, lower release costs, and support faster and better secondary trade.”
“Despite these promising signs, most tokenization initiatives remain small and above all,” Cazenave said. “Instruments are usually issued by private placements and are held at maturity. The interoperability between the release platforms is limited.”
Esma is keen on new tech but drives care
Cazenave said ESMA is “diligently continuing to explore what new technologies can bring,” but the priority forms them in a way that protects investors and financial stability.
He added that tokenization could improve “interoperability, transparency and cross-border efficiency” while cutting costs-if it was implemented “with the right legal framework.”
The EU opened a pilot for blockchain technology, allowing companies to test products with exceptions, which Cazenave said, along with lessons learned from EU markets to crypto-assets (Mica) Regulation, helps with how to regulate tokenizing assets.
Robinhood, Coinbase dive into tokenizing stocks
US trading platform based on US Robinhood Markets launched tokenized stocks for trading in the EU in June, which faced with investigation From some of the companies represented and EU member countries.
Crypto -based US -based exchange also launched Kraken a tokenized offer of stock In June, that it was not yet available in the US or the EU, while the rival Coinbase Global exchange had approve from regulators to launch one’s own offer.
Magazine: Robinhood’s tokenized stocks provoked a legal hornet’s nest
