In recent months, equity tokenization has once again become a focal point in the market. On one hand, several institutions and asset service providers have launched products that claim to be equivalent to traditional equity legal rights, utilizing blockchain as the underlying technology; on the other hand, regulatory bodies have issued clearer warnings and requirements regarding the nature of tokenized products, disclosure, and investor protection. Actual progress coexists with risks, pushing the market into a turning point from "experimentation to institutionalization."

One of the most closely watched recent cases is the collaboration between crypto financial company Galaxy Digital and platform Superstate, which launched the GLXY token on the Solana blockchain, claiming that these tokens correspond to registered common stock and maintain shareholder rights under existing legal frameworks. This approach is seen as an attempt to directly move "regulated securities" onto the blockchain. Similarly, asset management and technology platforms like Ondo are also introducing U.S. stocks and ETF products in the form of tokenized securities supported by trusts, attempting to establish compliant trading and settlement channels on public blockchains like Ethereum.

U.S. regulators emphasize that tokenized securities are still securities and must comply with existing securities laws and trading settlement rules; regulatory officials have repeatedly reminded market participants that they cannot evade legal obligations under the guise of technology. Meanwhile, European regulators have also issued warnings about "tokenized stocks," pointing out that certain tokenized stock products do not confer real shareholder rights, which can lead to investor misunderstandings and affect market integrity. Overall, regulatory concerns focus on the equivalence of rights, custody and settlement security, and platform disclosure obligations.

Although media and industry reports indicate significant overall growth in the scale of tokenized real-world assets (RWA), the market capitalization of "tokenized public company stocks" remains a niche market, with generally low liquidity and market-making depth. Industry data shows that the total amount of tokenized stocks is only a tiny fraction of the traditional stock market, but the quarterly growth rate and the increase in pilot projects indicate that the market is moving from concept validation to commercially viable products. Platforms and custodians are also seeking regulatory exemptions or collaborating with brokerages to achieve compliant asset support and settlement arrangements.

There are two main paths emerging in the industry: one is the "trustee/wrapping" model—where brokerages or custodians hold traditional securities and issue corresponding rights tokens on the blockchain through special purpose vehicles; the other is "native tokenization"—where securities are directly represented as legally recognized securities on the blockchain (this path presents greater challenges in terms of law and infrastructure). Many tokenization service providers have publicly expressed a preference for trustee-supported methods to quickly align with existing legal frameworks, while some tech advocates push for native tokenization to achieve more complete on-chain automation.

Investor rights: The key lies in whether the tokens genuinely carry shareholder rights such as voting, dividends, and company information disclosure. If synthetic tokens that merely track prices are used as trading mediums, investors may not be true shareholders.

Settlement and custody: Maintaining a "one-to-one" correspondence between off-chain securities registration systems and on-chain tokens is fundamental to preventing duplicate issuance and ownership disputes. Regulators prefer to see the involvement of brokerages/custodians and clear compliance processes.

Market liquidity and market-making: Currently, many tokenized stocks have limited liquidity, and the price discovery mechanism is not yet mature, requiring qualified market makers and clearing arrangements to support ongoing trading.

Cross-border and regulatory arbitrage: Due to varying regulatory rhythms for tokenization across regions, platforms may launch products first in jurisdictions with relatively friendly regulations, leading to additional complexities in regulatory coordination and investor protection.

For regulators: Clear classification standards for tokenized securities, information disclosure, and compliance pathways should be established, prioritizing the resolution of ownership confirmation, cross-system settlement, and market manipulation prevention issues; at the same time, controlled pilot projects should be allowed to observe the actual impact of technology on trading efficiency and costs.

For issuing companies and platforms: It is essential to clearly indicate the relationship between token rights and traditional securities rights in product promotions to avoid confusing investors about core differences such as "tradability" and "shareholder rights"; and to establish a linkage mechanism with regulated brokerages and custodians to strengthen legal and operational compliance.

For institutional and retail investors: Exercise caution, prioritizing the examination of the legal attributes of tokens, underlying custody proofs, and the compliance qualifications and market-making depth of platforms; view tokenized tools as a supplement rather than a replacement for existing securities frameworks.

Stock tokenization has made the leap from theory to tradable products in terms of technology and some business models, but to become mainstream market infrastructure, it must undergo legal confirmation, settlement integration, and synchronized evolution of regulatory frameworks. The current stage presents a situation of "accelerated pilots and parallel regulatory interceptions": market stakeholders and regulatory bodies need to use institutional design to mitigate investor misunderstandings and operational risks, which will determine whether tokenization can transition from short-term noise to long-term sustainable market innovation.

Related: OKX fined $2.6 million by the Dutch central bank for operating without a license before MiCA implementation.

Original article: “Equity Tokenization: Key Milestones from Pilots to Regulatory Contest”

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