ESMA Highlights Risks of Tokenized Stocks in the EU

According to PANews, Natasha Cazenave, Executive Director of the European Securities and Markets Authority (ESMA), has raised concerns about tokenized stocks, a new form of digital asset linked to the prices of publicly listed companies. Cazenave warned that these assets might create a false sense of ownership among investors, potentially undermining market confidence. Cazenave noted that many tokenized stock products currently promoted in the European Union do not grant investors actual shareholder rights, such as voting or dividend distribution. She emphasized that due to a lack of transparency in how these assets are presented, retail investors might mistakenly believe they own company stocks when they do not. Despite the benefits of tokenization, such as fractional trading and 24/7 market access, Cazenave highlighted the specific risk of investor misunderstanding due to the absence of ownership rights. Proponents argue that tokenization can modernize finance by reducing costs and broadening access to various assets, including stocks, bonds, and real estate. While acknowledging this potential, Cazenave pointed out that most existing projects are limited in scale and lack liquidity, falling short of the efficiency improvements claimed by supporters.