Global regulators warn SEC: Encrypted stocks may pose risks to investors' cash.

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Global regulatory agencies warn that tokenized stocks carry risks because they do not provide full benefits like traditional stocks, such as voting rights or dividends. Additionally, misleading promotion of these tokens as real stocks may harm transparency and market stability.

The World Federation of Exchanges (WFE), ESMA, and the IOSCO Fintech Task Force have called on the SEC to enhance oversight of this type of asset. In a letter to the regulatory agency, WFE expressed concern about the rise of brokerage firms and cryptocurrency platforms offering "tokenized US stocks," warning of risks to investors as well as the reputation of businesses if the products fail.

WFE emphasizes the need to apply securities law to tokenized assets, clarifying regulations on ownership, custody, and preventing promotion as if they were real stocks.

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