The growing popularity of so-called tokenised shares, offered by platforms such as Robinhood and Coinbase, has attracted the attention of EU regulators. The European Securities and Markets Authority (ESMA) warns that such instruments, although based on innovative blockchain technology, can lead to ‘misunderstandings’ and create new risks for investors.
The main problem identified by ESMA concerns the legal nature of tokenised shares. These are digital assets whose price is linked to the share price of a listed company, but their purchase does not usually make the investor an actual shareholder.
This means the absence of fundamental corporate rights, such as the right to vote at general meetings or receive dividends. Investors only acquire exposure to the share price and not a real share in the company.
The structure of these instruments is often based on special purpose vehicles (SPVs) that hold the underlying shares, further complicating the legal position of the token holder.
Natasha Cazenave, ESMA’s executive director, highlighted that while tokens offer benefits such as continued market access and fractional purchase opportunities, the lack of shareholder rights creates risks and requires clear communication from issuers.
Proponents of tokenisation see it as the future of financial markets, enabling efficient and liquid trading of a wide range of assets.
However, ESMA cools this optimism, pointing out that so far most such initiatives remain small and have negligible liquidity.
The European regulator’s concerns are shared by the World Federation of Exchanges (WFE), which has called for restrictions on the trading of tokenised shares. It points out that they could threaten the integrity of the market and expose investors to losses.
The appeal of the two institutions sends a clear message to the fintech industry: further development of tokenisation-based products must go hand in hand with the introduction of robust safeguards and full transparency for end users.
