Tokenized Securities

Tokenized securities are traditional financial instruments, such as government and corporate bonds, company shares, money market fund units and private fund interests, whose ownership is represented by tokens on a blockchain or other distributed ledger. The token may be the security itself, issued natively on the ledger, or a digital record of a security held in conventional form by a custodian. Either way, the holder has the same legal rights as with any other security, and the instrument remains subject to securities law.

Tokenized securities are the core of the broader move to bring real-world assets on-chain through tokenization. The term overlaps with security tokens, which describes crypto-style tokens that legally count as securities, and with tokenized funds. Banks, asset managers, stock exchanges and central securities depositories have all run projects, and regulators have repeatedly stated that putting a security on a blockchain does not change its legal nature.

Owning a share or a bond today usually means having an entry in a chain of electronic records kept by brokers, banks, custodians and a central depository. Moving it from one owner to another involves several organizations updating their books, which takes time, often a day or more, and costs money.

A tokenized security puts that ownership record on a shared digital ledger that the participants can all see and update together. Transferring the security becomes more like sending a digital token, and payment can be exchanged at the same moment. The rights are unchanged: a tokenized bond still pays interest and must be repaid, and a tokenized share still represents part of a company. What changes is the plumbing used to issue, hold and trade it.

An issuer, often working with a bank or tokenization platform, creates tokens that represent the securities and records them on a ledger, which may be a public blockchain such as Ethereum or a permissioned network run by financial institutions. Smart contracts can encode rules such as who may hold the token, transfer restrictions, interest payments and corporate actions. Because securities law requires investor checks, most tokenized securities can be held only by wallets that have passed identity verification, and an appointed transfer agent or registrar keeps the legally authoritative record.

For settlement, a tokenized security can be exchanged against a tokenized form of money, such as a tokenized deposit, a stablecoin or, in pilots, central bank money, achieving delivery versus payment in a single step.

• Bonds. In 2021 the European Investment Bank issued a digital bond on the Ethereum blockchain, and governments, development banks and companies have since issued many more tokenized bonds, including in Hong Kong, Switzerland and Singapore.
• Money market funds. Asset managers including Franklin Templeton and BlackRock have launched tokenized funds holding US Treasury securities, which some crypto firms use as a yield-bearing reserve or as collateral. See tokenized money market fund.
• Shares. Some companies and platforms have issued or recorded shares as tokens, and products that tokenize existing listed shares are covered under tokenized stocks.
• Private markets. Interests in private equity, private credit and real estate funds have been tokenized to allow smaller minimum investments and easier transfer.

Supporters argue that tokenized securities can shorten securities settlement times, reduce reconciliation between institutions, allow trading outside normal market hours, make it easier to divide assets into smaller units and allow assets to be used as collateral more quickly. A single shared record can also reduce errors and give regulators better visibility.

Tokenized securities fall under existing securities law. In the United States, the Securities and Exchange Commission treats them as securities subject to registration, custody and trading rules. The European Union introduced a pilot regime for market infrastructures based on distributed ledger technology, applying from March 2023, which allows trading and settlement venues to test tokenized securities under adapted rules; securities are excluded from the separate Markets in Crypto-Assets Regulation. Switzerland passed legislation in 2021 recognizing ledger-based securities, and the United Kingdom launched a digital securities sandbox in 2024. Rules continue to develop as of November 2026.

Adoption has been slower than early forecasts. Many tokenized issues remain small and trade rarely, because liquidity stays in traditional markets. Different platforms and ledgers often cannot communicate, fragmenting the market. Legal questions remain about which record is authoritative, how insolvency would be handled and how tokenized securities fit with existing central securities depositories. Smart contract bugs, lost keys and the operational risk of new infrastructure add further concerns, and on public blockchains firms must manage privacy and the risk of tokens reaching unverified holders.