Securities Transfer Association Lobbies SEC: Third-Party Stock Tokens Could Threaten Market Integrity

As the tokenization of capital markets heats up, the Securities Transfer Association (STA) recently submitted a comment letter to the U.S. Securities and Exchange Commission (SEC), warning that stock tokens issued by third-party entities could undermine market integrity. The association urged regulators to prioritize tokenized securities authorized by listed companies in future rulemaking.

The STA represents multiple Wall Street transfer agents. Its members argue that genuine tokenized stocks should be formally authorized by the issuing company and recorded on the official shareholder register, rather than being created as "wrapped" token products by independent platforms.

The association noted that third-party stock tokens could confuse investors about their actual holdings and expose them to platform credit, custody, and operational risks, without establishing a direct legal relationship with the listed company. Therefore, any innovation exemptions, pilot programs, or permanent regulatory frameworks for tokenized securities should give priority to the issuer-supported model. The STA also urged the SEC to reform the existing Direct Registration System (DRS), arguing that the current U.S. securities depository system is ill-equipped to meet the real-time transfer and settlement needs of on-chain securities. It further recommended that regulators collaborate with the Depository Trust & Clearing Corporation (DTCC) to optimize digital securities infrastructure.

Currently, the global tokenized stock market, valued at approximately $2 billion, is predominantly dominated by the third-party model, including products launched by Ondo Finance and Kraken. In contrast, institutions like Securitize and Figure adopt the issuer-authorized model. (CoinDesk)