The Securities Transfer Association advocates for preferential treatment for issuer-sponsored tokenization under upcoming regulatory guidelines.
By Krisztian Sandor|Edited by Nikhilesh De, Aoyon Ashraf Jul 13, 2026, 1:45 p.m. 8 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on U.S. Securities and Exchange Commission (Shutterstock)SummaryShow- The Securities Transfer Association is advocating for the SEC to give priority to issuer-authorized tokenized shares over those from third-party entities while crafting regulations for U.S. equities on blockchain.
- The association asserts that only tokens sanctioned by the issuer and included in official shareholder records should be recognized as legitimate tokenized stock, warning against the risks associated with synthetic and third-party models.
- However, some analysts suggest that regulators should differentiate between issuer-backed, custodial, and synthetic models as the race to develop a multitrillion-dollar tokenized securities market intensifies.
The push to tokenize capital markets is gaining momentum, prompting discussions among U.S. regulators about the framework for transitioning stocks to blockchain technology.
The Securities Transfer Association (STA), representing transfer agents and notable Wall Street firms, is calling on the Securities and Exchange Commission (SEC) to favor issuer-sponsored tokenized securities over those issued by intermediary firms as it formulates rules for integrating traditional securities into blockchain frameworks.
In a communication to the SEC, the STA emphasized that blockchain-based shares should be genuine securities authorized by the issuing company and documented in its official shareholder registry, rather than tokens produced by unrelated platforms.
The letter stated, "The distinction is fundamental. An Issuer-Sponsored Token is an actual share or other security of the Corporation." The STA also cautioned that holders of third-party tokenized stocks encounter credit, custody, and operational risks associated with the issuing platform.
According to the STA, "Issuer-Sponsored Tokens can yield significant advantages for issuers, investors, and the U.S. capital markets, but this is contingent on the Commission establishing the foundational architecture appropriately."
The group's appeal addresses a critical issue in tokenization: the legal framework that should support blockchain-based stocks as Wall Street and crypto firms strive to bring equities onchain.
This request comes amid a surge in interest in tokenization, which has emerged as one of the fastest-growing segments in digital assets, captivating Wall Street's focus. Various asset managers, crypto firms, and brokerages are competing to transition stocks, bonds, and funds onto blockchain networks, claiming the technology can simplify the transfer and settlement of securities while integrating them into digital financial ecosystems.
Indeed, some forecasts suggest that tokenized assets could evolve into a significant market. Global bank Citi projected that the market for tokenized securities could reach $5.5 trillion by 2030, with tokenized stocks alone expected to amount to $2.6 trillion.
Different Tokenization Models
Transfer agents play an essential role in the financial market infrastructure by maintaining official shareholder records, managing ownership transfers and corporate actions, and determining legal ownership of securities, thus being pivotal in the functioning of tokenized equities.
As the landscape of tokenization has progressed, various legal frameworks have emerged.
In the issuer-sponsored model, a company approves tokenized shares and records them in its official shareholder register, granting investors the same legal rights as traditional stock. Conversely, third-party models rely on intermediaries. In custodial frameworks, a regulated entity holds the underlying shares and issues blockchain-based tokens that represent investors’ ownership interests, while synthetic models provide only economic exposure to a stock's price.
The SEC has acknowledged these differences in a January staff statement discussing how tokenized securities might align with existing securities regulations. This statement categorized third-party tokenization into custodial tokenized security entitlements and synthetic products, recognizing that third-party tokenization can vary in form and the rights granted to investors. Although the statement lacks formal Commission authority, it sheds light on the agency staff's perspective on tokenization.
Currently, the majority of the approximately $2 billion tokenized stock market operates under the third-party synthetic model, led by Ondo Finance and Kraken's xStocks, and is generally not accessible to U.S. retail investors. Companies like Figure (FIGR) and Securitize (SECZ) have issued their shares onchain, adhering to the issuer-sponsored model. Following the custodial model is Dinari, which was the first to receive broker-dealer registration in the U.S. for a tokenized equity platform. Recently, Ondo Finance also took steps toward the custodial model by engaging a licensed transfer agent and Broadridge to manage proxy voting, regulatory disclosures, and shareholder communications.
STA Advocates for Issuer-Backed Approach
In this context, the STA has urged the SEC to clearly differentiate between issuer-sponsored tokenized securities and third-party stock tokens.
The association contends that tokenized securities must be genuine shares sanctioned by the issuing company and documented in its official shareholder register, warning that third-party tokens could mislead investors, undermine shareholder rights, and expose token holders to risks associated with platforms, custody, and counterparties instead of providing a direct legal connection to the issuer.
The letter indicated that any "innovation exemption, pilot program, no-action position, or permanent framework" for tokenized securities should exclusively apply to issuer-sponsored models. The STA also called on the SEC to mandate issuer consent before platforms market products as tokenized shares of public companies and to impose clear disclosure and compliance requirements for any third-party models allowed.
Ann Bowering, CEO of issuer services at Computershare North America, stated, "Our listed company clients have expressed concerns regarding wrapper-style products, which may appear to represent ownership of a company's shares while being outside the issuer's official records, governance, and communication channels."
Fiona Chalmers, global CEO of issuer services at Computershare, emphasized, "It's essential that innovation and market integrity develop in tandem, with distinct differences between issuer-sponsored tokenized securities and wrapper products. As tokenization rapidly advances across global markets, the regulatory choices made now will influence the accessibility of tokenized shares for issuers and their shareholders."
Equiniti, another prominent transfer agent in both the U.S. and UK, supported this perspective, advocating for a clear distinction between issuer-authorized tokenized shares and third-party offerings. Bullish (BLSH), the parent company of CoinDesk, announced plans to acquire Equiniti, targeting completion early next year.
Dan Kramer, CEO of transfer agent Equiniti, stated, "A token that isn't authorized by the issuer and recorded through its transfer agent isn't a tokenized share; it is a synthetic instrument that exposes investors and leaves issuers without recourse." He urged the SEC to clarify this distinction in its regulatory framework before third-party tokens proliferate, complicating the issue further.
The STA's letter also called for an update to the Direct Registration System (DRS), arguing that the current method for transferring shares between DTCC's broker-held accounts and transfer-agent records is too slow for tokenized markets and introduces unnecessary barriers for issuer-sponsored tokenization. The Depository Trust & Clearing Corporation (DTCC) is the primary clearing and settlement utility in U.S. securities markets, processing $4.7 quadrillion in securities transactions last year, while its subsidiary, the Depository Trust Company (DTC), offers custody and asset services for over $100 trillion in securities. The STA urged the SEC to collaborate with DTCC and transfer agents to streamline these transfers as digital securities gain broader acceptance.
Increased Scrutiny on Tokenized Stocks
The challenges posed by synthetic stock tokens have become more pronounced as brokerages and crypto firms increasingly introduce blockchain-based stock products.
Last year, OpenAI publicly distanced itself from Robinhood's tokenized product linked to its shares, stating it had neither approved the offering nor that the tokens represented actual equity in OpenAI. This incident underscored the potential for confusion surrounding tokenized securities when the underlying issuer is not involved.
The conversation is likely to gain further significance as major financial institutions and exchanges prepare to broaden their tokenized securities offerings under clearer regulatory guidelines. Coinbase has announced plans to launch onchain shares of U.S. stocks, while Robinhood has extended its stock token offering to users across 120 countries. Nasdaq received SEC approval to experiment with tokenized securities trading and has partnered with Kraken to distribute these tokenized stocks globally, while the New York Stock Exchange has collaborated with Securitize to establish a tokenized securities infrastructure.
Meanwhile, the DTCC is set to commence testing its tokenized securities platform in July, with a broader rollout anticipated in October. This service will enable firms to issue blockchain-based versions of assets currently held in custody while maintaining the same ownership rights and legal protections as traditional securities.
'The Real Problem'
Joris Delanoue, CEO and co-founder of Fairmint, the first SEC-registered transfer agent operating natively onchain, remarked that while blockchains can modernize transfer agents, they cannot fully replace them.
He stated, "The STA letter addresses the core issue that differentiates genuine onchain equity from mere tokenized representations of equity. A blockchain isn’t the ultimate source of truth; it is the issuer-authorized shareholder register that holds that distinction."
Digital ledgers can facilitate programmable, real-time, and globally interoperable records, he continued, but they must uphold the legal foundations of capital markets.
Carlos Domingo, CEO of tokenization firm Securitize and a STA member, contended that the rise of synthetic tokens can lead to market fragmentation and complicate regulatory oversight.
He noted, "That poses a significant challenge for investors, issuers, and overall market integrity, which is why regulatory frameworks must clearly differentiate Issuer-Sponsored Tokens from synthetic alternatives. Synthetic tokens do not represent a shortcut to market modernization; rather, they introduce additional risks and confusion."
Louis Froelich, a partner at law firm Womble Bond Dickinson and a former hedge fund executive, argued that while regulators should acknowledge that third-party stock tokens are distinct from conventional shares, they should not dismiss them entirely.
He explained, "In many respects, third-party stock tokens are not a new concept: regulated markets for options, futures, and swaps have long provided price exposure to stocks without conferring ownership. The innovation lies in blockchain technology enabling more efficient and broader distribution."
Froelich cautioned that since holders of such tokens might lack voting rights, dividends, and a direct legal claim against the issuing company, they could trade at a discount compared to the underlying shares. However, he suggested that custodial tokenization models preserving voting rights and corporate actions may resemble traditional securities more closely than synthetic products.
"I would advise the Commission to avoid dismissing third-party stock tokens and instead classify them as a distinct financial instrument, clearly separating them from actual stocks," he added.
Diverse Opinions
Gabe Otte, CEO of Dinari, remarked, "The key question is whether the tokens reflect genuine stock ownership or just economic exposure." He acknowledged that many of the STA's concerns are valid but primarily apply to synthetic tokenized products. He referenced the SEC's January statement, which distinguishes custodial tokenized securities from synthetic models, advocating for separate evaluations of regulated custodial frameworks.
Otte asserted, "Both issuer-sponsored and custodial models provide true stock ownership, and these should be differentiated from synthetic models for the benefit of investors."
Alan Konevsky, CEO of digital securities platform tZERO, concurred that issuer-sponsored tokenization preserves the direct relationship between companies and investors, but he suggested the market is likely to accommodate various compliant approaches.
He stated, "Innovation is progressing rapidly, and we anticipate the emergence of multiple compliant, non-misleading, economically and technologically significant models as the market evolves."
Eli Cohen, chief legal officer at tokenization platform Centrifuge, which focuses on onchain funds, noted that the letter reflects transfer agents' concerns about losing market share if third-party models gain traction.
Cohen explained, "In this instance, the STA is safeguarding its interests. Transfer agents earn fees from issuers, so if non-issuer securities gain popularity, the existing transfer agent business models may contract."
Cohen highlighted that the more critical aspect of the letter is its call for the SEC to modernize the Direct Registration System. "The STA rightly points out that the current system is overly reliant on DTC and is too sluggish to compete with synthetic offerings," he stated. "If DTC cannot enhance its system's speed soon, the traditional transfer agent model risks losing its relevance and role in the market."
The SEC has yet to introduce formal regulations specific to tokenized securities. The agency is anticipated to propose an innovation exemption designed to encourage tokenized securities, although details regarding the timeline and scope remain unclear.
As brokerages, crypto firms, and Wall Street players expand their blockchain-based equity offerings, the SEC's stance on issuer-sponsored and third-party models will significantly influence the future development of tokenized stocks in the U.S. and the rights afforded to investors.