ESMA warns of liquidity fragmentation in tokenized stocks and compliance risks in prediction markets

ESMA stated that the market for tokenized equities has grown from $350 million to $2.2 billion over the past 18 months; however, multiple tokenized versions of the same share could result in liquidity fragmentation. Meanwhile, certain products backed 1:1 by underlying shares still depend on off-chain ownership registries and traditional settlement channels, and have not yet fully realized on-chain atomic settlement.