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Key Takeaways
- The STA wants the SEC to limit any future tokenized-securities framework to issuer-sponsored tokens recorded in official shareholder registers.
- The SEC’s January 28 staff statement already separates issuer-sponsored, custodial, and synthetic tokenization models, though it carries no formal rulemaking force.
- Critics like Centrifuge’s Eli Cohen argue the STA’s push partly protects transfer agents’ existing business, as the tokenized stock market moves toward a projected $5.5 trillion by 2030.
The Securities Transfer Association, a trade group representing Wall Street’s transfer agents, sent a letter to the Securities and Exchange Commission urging the agency to give preferential regulatory treatment to issuer-sponsored tokenized securities over tokens created by unaffiliated platforms. The group argues that only company-authorized tokens recorded in official shareholder registers should count as true tokenized stock.
STA Argues For A Bright Line Between Token Types
The STA’s letter draws a distinction between securities that companies formally authorize and record in their own shareholder registers, and tokens issued by third parties without that direct legal relationship. The group said the difference should shape how the SEC writes rules for moving equities onto blockchain networks. The letter stated:
“The distinction is fundamental. An Issuer-Sponsored Token is an actual share or other security of the Corporation.”
The STA argued that holders of third-party tokens instead carry the credit, custody and operational risks of the platform that issued them, rather than a direct claim on the underlying company.
The letter asked the SEC to limit any future “innovation exemption, pilot program, no-action position, or permanent framework” for tokenized securities to issuer-sponsored models. It also called for requiring issuer consent before platforms market tokens as shares of public companies, mandatory disclosures for any third-party models the agency does permit, and modernization of the Direct Registration System, which the group said is too slow to support tokenized markets in their current form.
Three Models Are Competing To Define Tokenized Stock
The SEC addressed some of these distinctions directly in a January 28 joint staff statement from its Divisions of Corporation Finance, Investment Management, and Trading and Markets, which set out a basic taxonomy for tokenized securities. The statement separated issuer-sponsored tokenization from two third-party categories, custodial and synthetic, while noting that the federal securities laws apply to tokenized securities the same way they apply to conventional ones, regardless of format. The statement does not carry the force of formal Commission rulemaking.
Under the issuer-sponsored model, a company authorizes tokenized shares and records them in its official register, giving holders the same legal rights as conventional stock. In the custodial model, a regulated entity holds the underlying shares and issues tokens representing an ownership interest. In the synthetic model, tokens provide only economic exposure to a stock’s price movement, without an underlying ownership claim.
Most of the roughly $2 billion tokenized stock market currently follows the synthetic model, led by Ondo Finance and Kraken’s xStocks, and remains largely unavailable to U.S. retail investors. Tokenization firms Figure and Securitize have issued their own shares onchain under the issuer-sponsored model. Dinari became the first platform to obtain U.S. broker-dealer registration for a tokenized equity product under the custodial model, and Ondo Finance moved toward that same structure earlier this month through a licensed transfer agent and a Broadridge partnership for proxy voting and shareholder communications.
Transfer Agents And Some Tokenization Firms Back The STA’s Position
Ann Bowering, chief executive of issuer services at Computershare North America, said the firm’s listed-company clients have raised concerns about wrapper-style products that can resemble share ownership while sitting outside an issuer’s own records and governance channels. Computershare serves as transfer agent for more than half of the S&P 500.
Dan Kramer, chief executive of transfer agent Equiniti, made a similar argument. He said a token not authorized by the issuer and recorded through its transfer agent is not a tokenized share but a synthetic instrument that leaves investors exposed. Carlos Domingo of tokenization firm Securitize, an STA member, echoed that view, arguing that a proliferation of synthetic tokens fragments markets and complicates oversight for regulators.
Critics Say The Divide Oversimplifies A More Complex Market
Not every market participant supports treating all third-party models the same way. Dinari chief executive Gabe Otte said the STA’s concerns mostly apply to synthetic products, not custodial ones, and pointed to the SEC’s January statement as evidence that regulators already distinguish between the two. Alan Konevsky of tZERO agreed issuer-sponsored tokenization has advantages but said the market will likely support multiple compliant structures as it matures.
Eli Cohen, chief legal officer at tokenization platform Centrifuge, offered a more pointed read of the STA’s motivation, saying:
“Here, the STA is protecting its market. Transfer agents are paid by issuers, so if non-issuer securities become widely adopted, the existing transfer agent franchises will shrivel up.”
Cohen said the letter’s more consequential request is its call to modernize the Direct Registration System, arguing that the current system, which relies entirely on the Depository Trust Company, is too slow to compete with synthetic alternatives.
Louis Froelich, a partner at law firm Womble Bond Dickinson, said third-party stock tokens are not entirely new territory, comparing them to existing regulated markets for options and swaps that already offer price exposure without ownership. He said the SEC should treat such tokens as a distinct asset class rather than dismiss them outright. He noted that tokens lacking voting rights or dividends could trade at a discount to the underlying shares.
Where Regulatory And Market Momentum Stand
The debate comes as brokerages and exchanges expand tokenized offerings. OpenAI publicly distanced itself last year from a Robinhood tokenized product tied to its shares, saying it had not approved the offering.
Coinbase has outlined plans to offer onchain U.S. stocks, Robinhood has expanded its stock token product to 120 countries, Nasdaq received SEC approval to test tokenized securities trading and has partnered with Kraken for distribution, and the New York Stock Exchange is working with Securitize on tokenized infrastructure.
The Depository Trust & Clearing Corporation plans to begin testing its own tokenized securities platform in July ahead of a broader rollout in October.
Citi has projected the broader tokenized securities market could reach $5.5 trillion by 2030 in its base case, with tokenized stocks alone accounting for $2.6 trillion of that total. The SEC has not yet proposed formal rules specific to tokenized securities, though Chair Paul Atkins has outlined plans for an “innovation exemption” intended to support limited tokenized trading; the agency has not specified a timeline or scope.
