The European Securities and Markets Authority (ESMA) recently issued an important warning to investors regarding tokenized stocks. ESMA Executive Director Natasha Cazenave emphasized that these new types of digital assets may mislead retail investors, potentially harming investor interests and threatening market stability.

Kazhenaf pointed out that there are significant flaws in tokenized stock products on the EU market. These products do not actually grant investors true shareholder rights, such as voting rights and the right to receive dividends. However, due to their lack of transparency, retail investors may mistakenly believe they hold company shares, when in fact they only own a digital token that mimics the price fluctuations of the stock.

Tokenized stocks are typically issued through special purpose vehicles or financial intermediaries. Their value is linked to the underlying stock, but they do not represent actual ownership. Although these products promote convenience, such as allowing fractional investments and trading around the clock, the lack of ownership may pose specific misunderstanding risks for investors, potentially undermining market confidence.

It is noteworthy that at the time when ESMA issued its warning, some trading platforms were actively promoting tokenized stock products in Europe and other regions. The World Federation of Exchanges also expressed similar concerns, calling on regulators to improve relevant regulations to protect investors from unexpected risks.

Although supporters believe that tokenization can drive financial modernization by reducing costs and expanding asset acquisition channels, Kazanav pointed out that most current tokenization projects are small in scale, lack liquidity, and are far from achieving the efficiency improvements claimed by their advocates.

With the continuous advancement of technology and the expansion of market scope, tokenization of stocks as an emerging field is expected to continue to receive close attention from regulatory agencies. European regulators are striving to find a balance between encouraging financial innovation and protecting investors' rights. This warning highlights regulators' concerns regarding the potential risks of emerging financial products, as well as their determination to maintain market integrity and protect investors' interests.