ESMA warns tokenized stock market growth may fragment liquidity

The European Securities and Markets Authority (ESMA) reported in its H1 2026 Trends, Risks and Vulnerabilities report that the market capitalization of tokenized stocks grew from approximately 300 million euros to nearly 1.9 billion euros over 18 months. ESMA warned that issuing multiple versions of tokenized products for the same underlying stock could fragment liquidity. The report noted that these offshore structures, while claiming 1:1 backing, function as wrapped securities with ownership records kept off-chain, lacking a single source of truth on-chain. Furthermore, complex intermediary arrangements increase risk, and many trades have yet to achieve true atomic settlement.