Are Tokenized Assets Safe? ESMA Director Cazenave Flags Investor Risks

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Europe’s top markets regulator is warning investors that some tokenized stocks may not be what they seem.

Natasha Cazenave, Executive Director of the European Securities and Markets Authority (ESMA), is raising red flags.

“Tokenization… could lead to a transformational change of our markets,” she said. “For regulators and policymakers, the priority must be to ensure that such innovation develops within a framework that safeguards investors’ interests and preserves financial stability.”

Her warning comes as the global tokenized assets market hits $600 billion, with no signs of slowing down.

“Fake Equity” Concerns

The main concern: many tokenized stock offerings aren’t actual shares. Instead, they’re often synthetic products that don’t provide shareholder rights like voting or dividends.

“If structured as synthetic claims rather than direct ownership, this can create a specific risk of investor misunderstanding,” Cazenave said.

The issue made headlines in July when Robinhood’s tokenized stock offerings of SpaceX and OpenAI drew criticism, with Elon Musk labeling the products “fake.”

Europe Leads the Tokenization Push

Europe is a growing player in tokenization. Fixed-income issuance on blockchain tripled last year to €3 billion, with Germany, France, Spain, and the European Investment Bank experimenting with digital bonds.

Meanwhile, the U.S. is ramping up its own efforts, with tokenized funds up 80% this year to $7 billion in assets under management.

Tech players are joining too – Google recently launched a ledger platform for tokenization and real-time settlement, showing it moving into the mainstream.

Testing, Sandboxes, and Next Steps

To keep pace, the EU is using its DLT Pilot Regime , a sandbox for market players to test tokenization projects under supervision. ESMA has suggested making this framework permanent and more flexible, tailoring rules to the level of risk.

Some in the crypto community argue that proper regulation could make tokenization even safer than traditional finance. As one X user wrote , “Real tokenization should enhance protections, not weaken them.”

The message is that innovation is welcome, but investor trust comes first.