At Ondo Finance, we believe tokenization is not only here to stay but is an essential step forward for global financial markets. Global capital markets are entering a new phase where tokenization is poised for mass adoption, however, recent commentary risks conflating poorly conceived and opaque products with thoughtfully designed and transparent tokenized securities.

To help set the record straight and share our perspective, we have published the following letter, outlining why tokenized real-world assets have an important role to play in building a stronger, more inclusive, and more resilient future of financial markets.

Full Letter:

Re: The Growing Role of Tokenized Securities

Dear Ms. Sukumar,

The World Federation of Exchanges (WFE) recently published a paper criticizing financial products “mimicking tokenized equities” – particularly products marketed as stock tokens that are not actual stocks.

• As a global leader in the tokenization of real-world assets, including U.S. stocks and ETFs, Ondo believes the WFE unfairly confuses poorly designed and regulated tokenization products with more responsible applications of tokenization technology.
• We are writing today to correct the record, and share our views more generally on the growing role of tokenized real-world assets in on-chain financial markets.
• Ondo believes that well designed tokenized products and trading solutions understood by investors have an important role to play in financial markets that complements traditional financial exchanges and market infrastructures operated by WFE members.

Foundations for Responsible Tokenization

We at Ondo fundamentally agree with the many commentators and financial institutions that believe global capital markets are entering a new phase where tokenization – the representation of financial assets on distributed ledgers – is poised for mass adoption. Key building blocks that were still developing a few years ago have matured; and market infrastructure is increasingly robust and interconnected, with major banks and market utilities having launched live distributed ledger platforms, and settlement networks achieving significant scale. At the same time, regulatory clarity also has dramatically improved in multiple jurisdictions, lowering a key barrier to institutional adoption. Policymakers are establishing frameworks that recognize tokenized assets and provide guidance for the use of blockchains across financial services.

Against this backdrop, a new kind of financial market is developing that combines the strengths of traditional financial institutions and market infrastructures with the new ideas from digital native companies and FinTechs. This combination holds the promise of creating a stronger and more robust system than either could achieve on its own, with corresponding benefits for securities issuers, investors, asset managers and others – if the new paradigm is supported.

For these reasons, we strongly disagree with the WFE’s position regarding tokenized products it describes as “mimicking” equities, including its overbroad characterization of them as often bypassing established safeguards and creating risks for investors – among other things.

• The WFE position unfairly and falsely presumes that all such products inherently lack safeguards and investor protections.
• In our experience, well-designed tokenization solutions can and do incorporate robust custody, investor protection, transparency, and security mechanisms that may be equivalent to or even improve upon traditional systems.
• Regulators around the world are also actively working to adapt their regulatory frameworks to reflect the presence of tokenized financial products and their individual characteristics to realize the public interest benefits associated with their use.

Tokenized financial products today are a reflection of the regulations that have governed the sector to date. On-chain investors want improved access to a wider range of financial exposures in public, permissionless environments, and regulatory requirements, investor protections, and preservation of TradFi market integrity create relatively narrow pathways for developers to follow to meet that demand. However, as the level of acceptance of blockchain technologies continues to increase rapidly among regulators, the range of compliant on-chain options has also grown. More and more investors are now using tokenized financial products, and Ondo believes this trend will continue. By engaging more proactively with these products, the WFE and its members will help to boost public confidence in financial markets generally.

¹World Federation of Exchanges, “Mimicking Tokenised Equities,” August 26, 2025 (https://www.world-exchanges.org/our-work/articles/mimicking-tokenised-equities).

²Ondo Finance and the Ondo Foundation, are leaders in the tokenization of real-world assets. Our Ondo Global Markets product provides investors with 24/7 on-chain exposure to over 100 tokenized U.S. stocks and ETFs. Available now for eligible Asia-Pacific, African, and Latin American investors, Ondo Global Markets is one of the largest gateways for global exposure to U.S. securities markets. A more detailed description is set forth in the Annex.

³Joint Trade Associations, “The Impact of Digital Ledger Technology in Financial Markets,” August 19, 2025 (https://www.gfma.org/policies-resources/joint-trades-publish-report-on-the-impact-of-dlt-in-capital-markets/).

Recommended Shift in Focus

Accordingly, we recommend that the WFE and its members continue their important work on tokenized securities, but also shift their focus towards promoting standards and practices that recognize well designed tokenized products and allow them to integrate seamlessly with legacy financial exchanges and market infrastructures.

• Such an adjustment would build upon the observations in the WFE’s 2024 paper in which it recognized tokenized traditional assets as a modernized and innovative iteration of traditional finance, providing new opportunities for investors and market participants.
• This change in focus would also aid the development of principles to inform how securities tokenization solutions can be seamlessly integrated with legacy market practices, and thereby return the WFE to a more technology neutral posture.

We believe that by shifting its approach to engage more proactively with tokenized financial products the WFE and its members would create significant public interest benefits. Among other things, continuing the current WFE approach of treating the risks of tokenized securities products in a monolithic manner would give investors, financial institutions, WFE members, and market supervisors little incentive to improve risk management practices based on their assessment of product differences and market conditions in their jurisdictions. In some cases, the WFE’s stance that all exposures to tokenized securities should be viewed equivalently (negatively) may also conflict with national laws and regulations that require authorities to apply a risk based analysis in their supervisory work.

A proactive shift in focus also would play to the strengths of the WFE and its members, who regularly organize complex topics for review and to promote the development of international consensus around new market practices. By helping to establish frameworks for the next generation of tokenized securities products, the WFE and its members also would be helping to lead the development of operationally resilient systems that promote financial stability by functioning well for issuers, financial institutions, asset managers, and retail investors in both business as usual and stressed market conditions.

⁴World Federation of Exchanges, “Demystifying Tokenisation: Embracing the Future,” June 11, 2024 (https://www.world-exchanges.org/our-work/articles/demystifying-tokenisation-embracing-future).

Our Perspective – Advancing The New Market Paradigm

Taking this approach is both timely and critical. As the United States and other jurisdictions rapidly develop new frameworks for tokenized securities products, there is a real danger that a failure to recognize the positive economic power of tokenized securities may create entirely unnecessary, and unevenly distributed, economic harm by restricting access to well designed tokenized securities products and services being built on blockchain systems.

To assist in this process, Ondo is prepared to consider supporting the WFE’s recommendations for further regulatory action, as we believe the custody, investor protection, transparency, security, and other features of the Ondo Global Markets network and products (described in more detail in the Annex to this letter) will certainly fulfill those and other regulatory expectations for tokenized financial products. While we would like to better understand the WFE’s perspective, our initial reading of the WFE recommendations suggests that their fair application could be entirely consistent with prompt, progressive adoption of tokenized securities products.

For example:

1. WFE Recommendation: Affirm the Principle of Technological Neutrality

Regulatory standards should apply consistently, irrespective of the technological format in which financial instruments are issued or traded.

Ondo Perspective: Agree. Traditional securities, such as stocks, bonds, and ETFs, represent ownership rights or claims on underlying assets or cash flows. The WFE itself has recognized that well designed tokenized assets can mirror this fundamental concept by digitally representing ownership and keeping intact the legal rights and obligations associated with the asset. Rather than a radical departure from the norm, tokenized traditional assets should be viewed as modernized forms of traditional finance, providing new opportunities for investors and market participants.

2. WFE Recommendation: Clarify Legal Frameworks

Regulators should resolve legal uncertainties regarding ownership, custody, and enforceability in tokenized environments.

Ondo Perspective: Agree. During this period of transition to a new market paradigm, we believe the WFE’s concerns should not focus on tokenization itself but on the regulations applicable to specific tokenization products and trading solutions. The WFE’s arguments against tokenization generally risk conflating the limitations of existing regulations with features of tokenization technology. The solution is to update regulations to encompass these new financial products and market practices, not to dismiss the innovation.

3. WFE Recommendation: Ensure Regulatory Parity

Tokenized equities and similar instruments should be subject to the same disclosure, trading, clearing, and settlement obligations as traditional securities.

Ondo Perspective: Agree in principle. This recommendation is agreeable to us in principle, but with a qualification.

In our view, the regulatory principle of “same activity, same risk, same regulatory outcome,” should apply to ensure equivalent regulatory treatment, regardless of the technology used to perform the activity. However, to achieve this objective in practice may require exemptions or adjustments in regulations to reflect a tokenized product’s particular features. The mechanical application of legacy rules to an evolving marketplace would not support the related public interest goals of building competitive and sustainable markets that support innovation while strengthening consumer trust.

We also note that this recommendation contradicts the WFE’s broader argument against “mimics.” If tokenized instruments are indeed securities, then the focus should be on how they are regulated under existing securities laws, and how those laws need to evolve, rather than implying tokenized products are inherently illegitimate or “harmful imitation.” The WFE’s own position is that they should be subject to the same rules, which suggests a path forward for legitimate tokenization rather than outright rejection.

4. WFE Recommendation: Promote Supervisory Coordination

IOSCO should enhance cross-border collaboration to prevent regulatory arbitrage and ensure coherent supervision of tokenized markets.

Ondo Perspective: Agree. This recognition of multi-jurisdictional legal uncertainty similarly contradicts the WFE’s proposed more definitive stance against tokenized securities products. If the legal status is unclear or inconsistent, then a blanket condemnation as “harmful imitation” is premature. The WFE should advocate for clear legal frameworks rather than making assumptions about the status of tokenized securities in individual jurisdictions or their inherent harm based on this ambiguity.

5. WFE Recommendation: Prevent Marketing of Derivatives Products as Stock Equivalents

Regulators should ensure that companies cannot market products as the equivalent of stocks when they are clearly not.

Ondo Perspective: Agree. The underlying concern is a problem of disclosure and investor education, not an inherent flaw of tokenized equities. With proper regulatory oversight, tokenization solutions can be mandated to clearly inform investors about the differences in rights and protections compared to traditional shares. The WFE’s concern can be addressed through updated disclosure requirements, not by rejecting the concept of tokenization generally.

Conclusion

Thank you in advance for considering our perspectives and suggestions set forth above. We would also be happy to answer questions, expand upon our reasoning, and provide more details regarding why we believe action by the WFE and its members is warranted in whatever form may be most useful to you. While we may disagree with the WFE on some points, our reading of your 2024 and 2025 papers on tokenization indicates to us that there are enough areas of common interest to support an investment of time to explore this topic further, collectively.

Yours sincerely,

Nathan Allman
Chief Executive Officer

Cc:

• Mr Boon Chye Loh, Chairman, WFE, Chief Executive Officer, SGX Group
• The Honorable Paul S. Atkins, Chairman, U.S. Securities and Exchange Commission
• Verena Ross, Chair, European Securities and Markets Authority
• Rodrigo Buenaventura, Secretary General, International Organization of Securities Commissions

Source: Ondo