Global Exchanges Caution: Excluding Crypto May Undermine Market Fairness and Integrity

The U.S. Securities and Exchange Commission (SEC) is under increasing scrutiny from international financial organizations, which are urging the agency not to provide sweeping regulatory waivers to crypto platforms dealing in tokenized stocks, amid growing worries about market fairness and investor safety. On November 21, the World Federation of Exchanges (WFE)—which counts major exchanges such as Nasdaq, Cboe, and CME Group among its members—sent a letter to the SEC, pressing the agency to turn down requests for "

" that would let crypto companies sidestep established securities regulations. The WFE cautioned that such waivers could create unfair competition, enabling unregistered platforms to divert trading activity away from regulated exchanges while avoiding essential protections .

Tokenized stocks, which use blockchain to represent fractional shares of traditional equities, have sparked both enthusiasm and skepticism. Supporters believe these assets could make trading more efficient and accessible, but detractors point to dangers like fragmented markets and unstable pricing. The WFE pointed out that tokenized stocks are often "

or as equivalents to actual stocks, though they are not," a distinction the group considers vital for regulatory clarity. While the WFE acknowledges the SEC’s power to issue exemptions, it insists these should be " " and serve the public interest, rather than allowing crypto platforms to operate as de facto national exchanges without meeting all requirements.

SEC Chair Paul Atkins has indicated a willingness to explore a "sandbox" approach, which would grant temporary exemptions for crypto firms to test tokenized offerings under regulatory oversight

. This strategy is part of a broader push to establish the U.S. as a leader in the crypto sector. Still, the WFE and other industry voices warn that such measures must not result in parallel, less-regulated markets. "Overly broad or blanket exemptions could undermine protections and splinter liquidity," the Securities Industry and Financial Markets Association (SIFMA) wrote in a November 26 letter to the SEC. SIFMA also referenced recent crypto market crashes, like the October 10 downturn, as evidence of the risks posed by unregulated leverage and the absence of circuit breakers—contrasting these with the stability of SEC-supervised equity markets.

This ongoing debate highlights the fundamental conflict between fostering innovation and upholding regulatory standards. While the SEC’s Crypto Task Force considers custom exemptions, established exchanges and advocacy groups maintain that essential values—such as equal access, openness, and investor safeguards—must remain intact. For example, Robinhood’s move into tokenized stocks through European collaborations and Coinbase’s pending SEC filings demonstrate the rising demand for blockchain-based trading

. Nevertheless, these developments are met with pushback from established players who see them as a threat to their business models. " ," stated James Auliffe, who leads the WFE’s technology working group, stressing that the advantages of tokenization must clearly outweigh the drawbacks.

The SEC’s forthcoming decisions will be pivotal for the evolution of tokenized assets. Should the agency move forward with its sandbox initiative, it will need to carefully balance encouraging innovation with maintaining market integrity. Detractors warn that even well-meaning exemptions could undermine the credibility of U.S. capital markets, which have long relied on robust regulatory protections to inspire investor trust. As SIFMA emphasized, "The strength of U.S. markets lies in their depth, liquidity, and reliability—qualities that cannot be sacrificed for the sake of speed or convenience".