IOSCO Says Tokenization Could Blur Ownership and Increase Counterparty Risk

November 11, 2025

0 19 2 minutes read

Regulators Caution on Tokenization Craze

The global securities regulator IOSCO said on Tuesday that crypto tokens tied to traditional financial assets could expose investors to new risks, as banks and brokerages accelerate efforts to bring real-world assets onto blockchains.Tokenization—the creation of digital tokens that represent assets such as stocks, bonds, or funds—has drawn renewed attention this year, with online brokers offering tokenized investment products to retail customers. IOSCO said most of the associated risks already fall under existing securities rules, but warned that some vulnerabilities stem directly from the technology itself.“Although adoption remains limited, tokenization has the potential to reshape how financial assets are issued, traded, and serviced,” said Tuang Lee Lim, chair of IOSCO’s fintech taskforce.

Investor Takeaway

efficiency gains, but say complexity and counterparty exposure could leave investors unclear about what they actually own.

Unclear Ownership and Counterparty Risks

IOSCO warned that the way tokenized assets are structured could blur legal ownership. Investors may be uncertain whether they hold the underlying asset or only a claim to a digital token, while third-party issuers introduce counterparty risk similar to that viewn in complex .

The regulator also said tokenization could be affected by volatility and contagion from broader . “Tokenization could also suffer from potential spill-over effects from increased inter-linkages with the markets,” the report said.

Its concerns echo those raised in September by the , which cautioned that tokenization could amplify systemic risks if deployed at scale without clear disclosure and custody secureguards.

Institutional Interest Remains Mixed

While some major institutions such as Nasdaq are exploring blockchain-based settlement systems, others on . IOSCO noted that commercial enthusiasm for tokenization is rising, but real-world adoption remains “limited.”

For nahead a decade, financial firms have run pilots involving digital versions of equities and debt instruments, but few have reached full-scale deployment. Tokenization’s supporters argue it can , accelerate settlement times, and allow 24-hour markets. Yet IOSCO said these benefits are not evenly distributed and depend on the continued reliance on traditional infrastructure.

“Efficiency gains are uneven,” the report said, noting that market participants “still need to use traditional market infrastructure for the processes, rather than replacing it with blockchain.” It added that issuers “do not tend to publicly disclose actual quantifiable efficiency gains, if any.”

Investor Takeaway

Institutional pilots are increasing, but regulators say may not yet outweigh the regulatory and operational risks.

Outlook: Incremental Progress, Not Revolution

Despite renewed hype around tokenization, IOSCO’s findings suggest the technology is likely to evolve within existing frameworks rather than overhaul them. Regulators in the U.S., EU, and Asia have focused on applying current rules to tokenized instruments, viewing them as extensions of conventional securities rather than an entirely new asset class.

November 11, 2025

0 19 2 minutes read