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Crypto firms’ tokenized stocks spark investor protection concerns

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Crypto companies are racing to launch stock-backed tokens, but traditional financial firms and regulators are sounding alarms over potential risks to investors and market stability.

Encouraged by President Trump’s pro-crypto policies, major players such as Robinhood, Gemini, and Kraken have rolled out tokenized stock products in Europe, with Coinbase and Dinari seeking U.S. approval. Even Nasdaq has proposed offering tokenized shares — a sign that the concept is moving into mainstream finance.

These blockchain-based instruments are designed to mirror traditional equities while enabling 24/7 trading and instant settlement. Their combined market value has surged to $412 million from just a few million a year ago, according to RWA.xyz. But critics warn that many of these products lack ownership rights, dividends, and regulatory safeguards, making them more akin to derivatives than stocks.

“There’s a real risk investors don’t know what they’re buying,” said Diego Ballon Ossio, a partner at Clifford Chance. Legal experts say inconsistent rights and disclosures across issuers could undermine market integrity.

While some firms like Kraken and Ondo Finance claim to fully back their tokens with underlying assets, others — including Robinhood’s tokens pegged to OpenAI — have faced regulatory scrutiny for using derivative structures.

Regulators in both the U.S. and Europe are divided over how to classify and supervise these products. Financial groups including Citadel Securities and SIFMA argue that tokenization should not bypass investor protection rules, warning that liquidity could fragment across unregulated markets.

Gemini Secures Nasdaq Investment Ahead of IPO, Strengthening Crypto–Wall Street Ties

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Cryptocurrency exchange Gemini, founded by Cameron and Tyler Winklevoss, has secured Nasdaq as a strategic investor in its upcoming New York listing, marking a significant step for the digital asset industry as it pushes further into mainstream finance.

IPO Details

  • Gemini is targeting up to $317 million in proceeds from its IPO.

  • Nasdaq will buy $50 million in shares in a private placement during the listing.

  • Trading is expected to begin Friday under the ticker “GEMI”, though final timing depends on market conditions.

Strategic Partnership

The partnership extends beyond capital:

  • Nasdaq clients will gain access to Gemini’s custody and staking services.

  • Gemini’s institutional clients will be able to use Nasdaq’s Calypso platform to manage and track trading collateral.

Market Context

  • The IPO comes amid a rebound in U.S. equity capital markets, with strong investor demand for new listings.

  • Recent high-profile IPOs — including Figma and Firefly Aerospace — have boosted confidence.

  • Gemini would become the third publicly traded crypto exchange, following Coinbase and Bullish.

Gemini’s Position

  • One of the largest U.S. crypto exchanges by volume, Gemini manages $21 billion in assets and has processed $285 billion in lifetime trading volume.

  • Services include an OTC trading desk, a U.S. crypto credit card, and support for Bitcoin, Ether, and stablecoins.

  • The company reported a net loss of $282.5 million on revenue of $68.6 million for the first half of 2025, compared with a smaller loss a year earlier.

Broader Significance

The Nasdaq partnership signals a deepening connection between Wall Street and crypto markets, reinforcing digital assets as a mainstream asset class.
The move also positions Gemini as a stronger competitor in an IPO wave dominated by crypto and AI-related firms.

Major U.S. Banks Explore Joint Stablecoin Initiative, WSJ Reports

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Several top U.S. banks, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, are reportedly in early discussions to jointly issue a stablecoin, according to a Wall Street Journal report published Thursday. The conversations are still preliminary and conceptual, sources told the newspaper.

Details of the Stablecoin Proposal

  • The effort involves entities co-owned by the banks, including The Clearing House and Early Warning Services.

  • One proposed structure could allow non-owner banks to also use the stablecoin, potentially expanding it into a broadly accepted digital settlement method within the financial industry.

  • The banks aim to explore whether a jointly issued dollar-backed stablecoin could enhance settlement efficiency, particularly for digital payments and interbank transfers.

  • Discussions also include the regulatory implications and technical infrastructure needed for a consortium-based coin.

Context and Market Implications

  • Stablecoins are cryptocurrencies pegged to fiat currencies (usually the U.S. dollar) and are primarily used to transfer value across crypto ecosystems quickly and with minimal volatility.

  • Currently, the U.S. stablecoin market is dominated by private players like Tether (USDT) and Circle (USDC). A move by traditional banks could challenge their dominance and legitimize digital dollar alternatives in regulated finance.

  • The initiative, if realized, would mark one of the most significant entries by traditional financial institutions into crypto infrastructure.

Political and Regulatory Backdrop

  • The report comes amid a shifting regulatory and political landscape in the U.S.:

    • Former President Donald Trump has positioned himself as a pro-crypto advocate, promising to become the “crypto president” and backing policies that promote blockchain innovation.

    • This contrasts with prior Democratic efforts to regulate or restrict aspects of crypto finance.

  • Regional banks are reportedly considering forming a separate consortium, highlighting the fragmented but growing interest in stablecoin issuance across the banking spectrum.

Responses and Next Steps

  • Citigroup, Bank of America, and Wells Fargo declined to comment.

  • JPMorgan did not respond to inquiries.

  • No official decisions have been made, and the project remains exploratory with potential changes in direction depending on regulatory feedback and internal priorities.