SEC Tightens Regulations for Tokenized Stocks and Synthetic Equity

The SEC emphasizes the need for issuer approval in tokenized ownership, raising concerns over the prevalence of synthetic equity in the market.

The Securities and Exchange Commission (SEC) has taken a firmer stance on the regulations surrounding tokenized stocks, clarifying that true ownership requires explicit approval from issuers. This announcement serves as a cautionary note, highlighting that a significant number of stock tokens available to retail investors may only offer indirect or synthetic exposure to the underlying equities.

The agency's latest guidance aims to bolster investor protection by ensuring that those who invest in tokenized stocks have a legitimate stake in the assets. By mandating issuer approval, the SEC is attempting to mitigate the risks associated with synthetic equity, which can sometimes mislead investors regarding their actual ownership rights.