Regulators Flag Key Risk in Tokenization

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As Wall Street giants like Nasdaq push into “tokenization,” a global regulatory body is asking a critical question: do investors truly understand what they’re buying?

IOSCO, the International Organization of Securities Commissions, reported Tuesday that the complex structure of tokenized assets could leave investors uncertain about whether they own the underlying asset or merely a digital token linked to it.

This confusion is just one of the new risks identified alongside counterparty risk from token issuers and potential contagion from the crypto market.

The report serves as a preemptive strike, urging caution even as it acknowledges tokenization’s potential to “reshape” finance. The warning echoes similar concerns recently raised by the European Union’s securities regulator.