#RWA Global Securities Regulator Says Tokenization Brings New Risks The International Organization of Securities Commissions (IOSCO), a global securities regulator, said in a report Tuesday that crypto tokens pegged to mainstream financial assets could pose new risks to investors, as the financial industry remains divided on the pros and cons of tokenization. Tokenization—the process of creating blockchain-based tokens pegged to real-world assets such as stocks or bonds—has regained interest among cryptocurrency enthusiasts this year, with new tokenized products being sold to the public through online brokers. Members of the IOSCO are regulators responsible for overseeing virtually all securities markets globally. The organization stated that most of the risks of tokenization exist within existing frameworks, but the underlying technology could introduce new risks and vulnerabilities. Tuang Lee Lim, Chair of the Board-Level Fintech Working Group at the International Organization of Securities Commissions (IOSCO), stated, “While the application of tokenization remains limited, it has the potential to reshape how financial assets are issued, traded, and served.” IOSCO added that the different structural forms of tokenized assets could leave investors uncertain whether they are owning an underlying asset or simply a crypto token, and third-party token issuers could create counterparty risk, echoing some concerns raised by EU securities regulators in September. IOSCO stated, “Tokenization may also be subject to potential spillover effects due to its increasingly close connection with the crypto asset market.” Some mainstream financial institutions, including Nasdaq, are heavily promoting tokenization, but other Wall Street players have expressed concerns. Imbalanced Efficiency Improvements For years, various financial institutions have been experimenting with issuing blockchain-based versions of assets. IOSCO stated that commercial interest in tokenization is rising, but practical applications remain “limited.” Proponents of tokenized assets argue that using blockchain can reduce transaction costs, speed up settlements, facilitate 24/7 trading, and even attract younger investors. However, the International Organization of Securities Commissions (IOSCO) stated that "efficiency improvements are uneven" because market participants still need to use traditional market infrastructure for trading, rather than replacing it with blockchain. The IOSCO stated, "Issuers often do not publicly disclose actual quantifiable efficiency improvements (if any)."