Tokenized shares, a new breed of digital assets that reflect the prices of companies that quote on the stock market, could give investors a false feeling of property and undermine market confidence, according to a higher European regulator.
Natasha Cazenave, Executive Director of the European Authority of Securities and Markets (ESMA), warned that many products of tokenized shares that are marketed in the European Union do not grant the real rights of shareholders, such as vote or dividends.
She said that the lack of clarity in how these assets are presented could lead retail investors to believe that they have company shares when, in reality, they do not.
Rights of absent shareholders
Unlike traditional capital purchases, tokenized shares are often issued through special use vehicles or intermediaries, and tokens simply track the price of underlying shares.
Cazenave emphasized that, although the tokenization promises characteristics such as fractional trade and access to the 24 -hour market, the absence of property rights raises a “specific risk of misunderstanding of investors.”
Their comments occur as platforms, including Robinhood and Kraken, expand the offers of tokenized shares in Europe and other regions.
The World Exchanges Federation echoed the concerns of the ESMA, urging regulators to strengthen supervision before the sector increases. The group warned that without intervention, tokenized products could expose investors to unexpected risks and damage market integrity.
Efficiency gains remain evasive
Defenders have argued that tokenization can modernize finance by reducing costs and expanding access to assets ranging from shares and bonds to real estate.
Cazenave acknowledged this potential, but pointed out that most existing projects remain limited in scale, illegids and far from offering the efficiency benefits promoted by defenders.
For now, European regulators seem intention to balance innovation with the safeguards of investors, indicating that tokenized actions will remain under scrutiny as technology develops.
