Tokenisation is likely a natural evolution of capital markets. Nevertheless, existing regulatory frameworks provide a strong foundation to manage risks arising from distributed ledger technology (DLT). The core risks – such as market abuse, weak governance, conflicts of interest and lack of transparency – are not new, and longstanding principles like market integrity, investor protection and effective supervision remain applicable regardless of whether activity takes place in traditional or digital markets.
As such, existing frameworks can be leveraged rather than replaced and accordingly, the WFE argues for a “same risk, same rules” approach, particularly in crypto markets, where platforms performing exchange‑like or broker‑dealer functions should be brought within the regulatory perimeter and held to equivalent standards.
This logic extends to emerging products such as mimicked or synthetic tokenised equities, which replicate economic exposure without granting shareholder rights. These instruments raise concerns about investor confusion, regulatory arbitrage and further market fragmentation, alongside reputational risks for issuers.
Prudential treatment of crypto-assets currently falls short of the goal of a “same risk, same rules” approach. A more risk-based approach and clearer definitions of crypto-assets is needed in this space. More broadly, a lack of a consistent global taxonomy for tokens creates problems and international standard setters revisiting and harmonising definitions would be welcome.
For tokenisation in regulated markets, the WFE views it as an evolutionary step rather than a transformative one, with the greatest benefits likely in post-trade processes such as collateral management, reconciliation and asset servicing. Existing regulatory frameworks should continue to apply, with only targeted technical adjustments to ensure legal certainty and effective supervision in distributed ledger environments.
The WFE emphasises that innovation and investor protection are complementary, not competing, and cautions against exempting new market participants from established rules. Sustainable innovation, including developments like tokenised collateral, should be pursued within robust governance frameworks to enhance efficiency while preserving trust, resilience and market integrity.