A top European regulator has warned that tokenised stocks could mislead investors and undermine confidence in financial markets. Natasha Cazenave of ESMA said many tokenised stocks, like voting or dividends, lack shareholder rights.

Unlike traditional equities, tokenised stocks are typically issued through intermediaries and merely track share prices. Cazenave cautioned that retail investors may wrongly believe they own company shares, exposing them to a risk of misunderstanding.

Her warning follows the expansion of tokenised stock services on platforms like Robinhood and Kraken.

The World Federation of Exchanges recently echoed these concerns, urging regulators to strengthen oversight. Without intervention, the group warned that tokenised products could threaten market integrity and heighten investor risks.

Although advocates say tokenisation could cut costs and widen access, Cazenave noted most projects remain small, illiquid, and far from delivering promised efficiency. Regulators, she added, remain focused on balancing innovation with investor protection.