Transfer agents push SEC to restrict unaffiliated tokenized stocks

Two securities transfer groups have told the SEC’s Crypto Task Force to write rules for issuer-backed tokenized stocks and ETFs while limiting versions created without a company’s approval.

Continental Stock Transfer & Trust Company laid out its position in a letter supporting tokenization more broadly. It called for tougher treatment of products built by unrelated platforms. The registered transfer agent backed a similar proposal from the Securities Transfer Association, an industry group that represents firms maintaining shareholder records and processing ownership changes.

Both organizations want a clear distinction between securities tokenized by an issuer and tokens created by a third party with no direct link to the company.

Under their approach, an issuer-sponsored token represents a security the company has authorized for blockchain-based issuance or trading. The transfer agent can then record the holder as a shareholder and apply the same ownership controls used for conventional securities.

An unaffiliated token might track a stock’s price or represent an indirect interest in shares held by another party. The STA argued that such arrangements do not necessarily create a legal relationship between the token buyer and the company whose stock provides the reference value.

“We support innovation in the securities markets,” CSTT wrote in its letter. “Any tokenization framework must preserve investor protection, issuer authorization, accurate shareholder records, transfer controls, and market integrity.”

CSTT warned that investors could mistake third-party tokens for direct shares even when the products provide different legal and economic rights. Unclear ownership structures may leave buyers without adequate disclosures about custody, voting rights, dividends, or claims during insolvency, the firm said.

For public companies, CSTT argued that unaffiliated products could disrupt shareholder records and make it difficult to identify the owners of an issuer’s securities. Missing or unreliable information could then affect voting, dividends, and other corporate actions such as stock splits or tender offers.

The STA identified additional concerns: insider trading, market manipulation, sanctions screening, and transfer restrictions. Its letter also cited possible reputational damage when a company’s shares are used in a tokenized product without its knowledge or consent.

CSTT asked the SEC to modernize registration documents in a way that gives priority to tokenization programs approved by issuers. The company opposed granting unaffiliated stock and ETF tokens relief through an innovation exemption unless the SEC first imposes investor safeguards.

The distinction echoes an earlier warning from SEC Commissioner Hester Peirce. In July 2025 she said blockchain technology does not alter the legal nature of an investment product.

“As powerful as blockchain technology is, it does not have magical abilities to transform the nature of the underlying asset,” Peirce wrote, as reported by Reuters. “Tokenized securities are still securities.”

Peirce also distinguished between securities tokenized by issuers and products created by unrelated third parties. Investors in third-party versions face risks that do not exist when they purchase shares directly from an issuer or through conventional market infrastructure, she said.

Demand for blockchain-based access to traditional assets has grown as crypto exchanges add stocks, ETFs, and derivatives to their product lines. Coinbase, Kraken, and Binance have each announced services connecting digital-asset users with traditional market products, though their structures and availability differ by jurisdiction.

Traditional market operators are pursuing tokenization through regulated infrastructure as well. In March the New York Stock Exchange announced a partnership with Securitize to develop a platform for tokenized securities, with Securitize serving as a digital transfer agent for participating corporate and ETF issuers. NYSE President Lynn Martin said new tokenization systems must retain the trust, transparency, and investor protections expected in established capital markets.

The SEC also approved a Nasdaq proposal allowing certain stocks to trade and settle in tokenized form. That model keeps the tokenized shares within an exchange system governed by existing securities rules.

The Depository Trust & Clearing Corporation has separately tested tokenization using assets linked to Microsoft (Alpha Score 62), Circle, the Invesco QQQ Trust (Alpha Score 44), State Street’s SPDR S&P 500 ETF, and BlackRock’s iShares 0–3 Month Treasury Bond ETF. The trial includes stocks, index funds, and short-term government debt products.

Unlike synthetic tokens produced without issuer involvement, these regulated projects use transfer agents, exchanges, or established clearing infrastructure to maintain ownership records. CSTT and the STA asked the SEC to preserve that connection as the agency develops formal rules for tokenized stocks and ETFs. The SEC’s Crypto Task Force has not signaled when it will propose a framework.