Two securities transfer industry groups have formally urged the U.S. Securities and Exchange Commission to prioritize issuer-backed tokenized stocks and ETFs while imposing stricter rules on unaffiliated token products that may not grant shareholders direct ownership rights.

Continental Stock Transfer & Trust Company, a registered transfer agent, outlined its position in a letter to the SEC's Crypto Task Force, a working group established in early 2025 under Acting Chair Mark Uyeda and led by Commissioner Hester Peirce to develop a comprehensive regulatory framework for digital assets. The firm expressed support for regulatory frameworks covering tokenized securities but called for tougher treatment of tokenized products created without the original issuer's approval.

CSTT's letter backed a similar proposal from the Securities Transfer Association, an industry group whose members—primarily SEC-regulated transfer agents responsible for maintaining authoritative shareholder records and processing ownership changes for public companies—asked the SEC to establish a clear regulatory distinction between securities tokenized directly by their issuers and tokens created by unrelated third-party platforms.

Issuer-Authorized vs. Unaffiliated Tokens

Under the framework proposed by the two groups, an issuer-sponsored token would represent a security that the issuing company has explicitly authorized for blockchain-based issuance or trading. A transfer agent could then record the token holder as a shareholder and apply the same ownership controls used for conventional securities.

By contrast, an unaffiliated token may merely track a stock's price or represent an indirect interest in shares custodied by another party. According to the STA, such arrangements do not necessarily establish a legal relationship between the token purchaser and the company whose stock underlies the token's reference value. The outcome of this debate could determine whether crypto exchanges offering tokenized equities must restructure their products to involve issuing companies directly or face tighter restrictions.

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

Risks of Third-Party Tokenized Products

CSTT cautioned that investors could mistake third-party tokens for direct equity holdings even when the products carry materially different legal and economic rights. Unclear ownership structures, the firm warned, may leave buyers without adequate disclosure regarding custody arrangements, voting rights, dividend entitlements, or claims in the event of insolvency.

For public companies, CSTT argued that unaffiliated tokenized products could disrupt shareholder records and make it difficult for issuers to identify the actual owners of their securities. Missing or unreliable ownership information could then interfere with voting, dividend distribution, tender offers, stock splits, and other corporate actions.

The STA flagged additional concerns related to insider trading, market manipulation, sanctions screening, and transfer restrictions. Its letter also noted the potential for reputational harm when a company's shares are used in a tokenized product without its knowledge or consent.

Based on those risks, CSTT asked the SEC to modernize registration documents in a manner that gives priority to tokenization programs approved by issuers. The firm also opposed granting unaffiliated stock and ETF tokens any relief through an innovation exemption unless the SEC first imposes binding investor safeguards.

Peirce's Earlier Warning

The distinction drawn by the transfer agents echoes a prior caution from SEC Commissioner Hester Peirce, who stated in July 2025 that blockchain technology does not change 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. Tokenized securities are still securities," Peirce wrote in a statement reported by Reuters.

Peirce distinguished between securities tokenized by issuers and products created by unrelated third parties. Investors in third-party versions, the commissioner noted, may face risks that do not arise when purchasing shares directly from an issuer or through conventional market infrastructure.

Regulated Tokenization Projects Continue to Expand

Demand for blockchain-based access to traditional financial assets has continued to grow, with major cryptocurrency exchanges adding stocks, ETFs, and derivatives to their product offerings. Coinbase, Kraken, and Binance have each announced services linking digital-asset users to traditional market products, though their structures and availability differ across jurisdictions. How the SEC ultimately defines the line between issuer-backed and third-party tokens could directly affect whether these exchange-based offerings can continue in their current form.

Traditional market operators are also pursuing tokenization through regulated infrastructure. In March, the New York Stock Exchange announced a partnership with Securitize to build a platform for tokenized securities, with Securitize acting as a digital transfer agent for participating corporate and ETF issuers. Under that arrangement, NYSE and Securitize plan to establish operating and regulatory standards for digital transfer agents.

NYSE President Lynn Martin stated that new tokenization systems must retain the trust, transparency, and investor protections expected in established capital markets.

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

The Depository Trust & Clearing Corporation has also tested tokenization using assets linked to Microsoft, Circle, the Invesco QQQ Trust, State Street's SPDR S&P 500 ETF, and BlackRock's iShares 0–3 Month Treasury Bond ETF. That trial encompasses stocks, index funds, and short-term government debt products.

Unlike synthetic tokens produced without issuer involvement, these regulated initiatives rely on transfer agents, exchanges, or established clearing infrastructure to maintain ownership records. CSTT and the STA have asked the SEC to preserve that connection as the agency develops its rules for tokenized stocks and ETFs.