Tokenization is the process of representing claims on an off‑chain asset—real estate, art, securities, commodities—as digital tokens on a blockchain. The token is not the asset itself; it’s a legal wrapper that encodes ownership rights and transfer rules, while settlement occurs on neutral rails. Done right, tokenization combines two strengths:
This isn’t a hypothetical in 2025. Major banks and asset managers are piloting and launching on‑chain offerings. Even incumbents frame the trend as the next evolution of fund wrappers—see the view that tokenization is “mutual fund 3.0,” per Bank of America—while issuers and broker‑dealers pursue capital to scale platforms, such as an RWA pioneer Figure filing for a $526M IPO. We’re also seeing public‑chain issuance—for example, Galaxy Digital equity going on‑chain via Solana tokenization—to test liquidity and settlement in the open.
Real estate. A special‑purpose vehicle (SPV) owns the property. Investors buy tokens that represent interests in that SPV (or in units of a trust/REIT). Rent/interest flows are recorded on‑chain; transfers are restricted to whitelisted investors to comply with securities rules. Property‑level data (appraisals, leases, insurance) can be anchored to the chain for audit trails. Secondary trading occurs on approved venues during permitted windows.
Fine art & collectibles. A custodian vaults the piece; tokens represent proportional interests or economic rights (not always governance). Provenance metadata and inspection reports anchor claims. Sales can include buy‑back or rights‑of‑first‑refusal enforced by smart contracts. Fractional sales open access to blue‑chip works while ensuring the original stays safeguarded.
Stocks & funds. Tokenised depository receipts or feeder‑fund shares track an underlying security or fund share held with a qualified custodian. Corporate actions (dividends, splits) are automated by contracts that check issuer feeds. Transfers are restricted to eligible investors and may observe blackout windows and lockups. With tokenised MMF/T‑billexposure, the token reflects claims on short‑dated instruments; redemptions follow fund rules with on‑chain attestations of reserves.
Bonds & credit. Issuers mint tokens representing tranches of a bond or private credit facility. Coupon schedules, call features, and covenants are encoded; payments are executed by contracts against whitelisted wallets. Collateral can be monitored on‑chain (e.g., real‑time borrowing base updates) with oracles feeding third‑party attestations.
Fractional access. High‑ticket assets (trophy real estate, art, private credit) become investable in smaller slices—broadening participation.
Atomic settlement & faster cash cycles. Tokens settle 24/7 with delivery‑versus‑payment (DvP), reducing failed trades and freeing capital tied up in T+1+/paper workflows.
Programmable compliance. Transfer restrictions, KYC tiers, lockups, and geographic limits are enforced in code. Auditors can replay state and prove that rules were followed.
Composability. Tokenised assets plug into lending, repo, and collateral marketplaces, enabling financing and hedging with fewer intermediaries.
Transparency. On‑chain registries, proofs of reserve, and investor‑level cap tables produce auditable histories for regulators and LPs.
Operational savings. Corporate actions, reconciliations, and reporting become event‑driven, cutting manual work and error rates.
Tokenization works when law and code agree. Key pillars:
Legal wrapper. Most projects use an SPV, trust, or fund share that clearly defines tokenholder rights (economic, voting, redemption). Ensure the constitutive documents tie tokens to enforceable claims.
Licensing & venue rules. If the token is a security, issuance and secondary trading must occur under applicable exemptions or registrations. Platforms may need broker‑dealer/ATS (or local equivalents), fund licences, or transfer‑agent capabilities.
Custody & segregation. The real asset (or underlying shares/notes) must sit with qualified custodians; token reserves and omnibus accounts require clear segregation and insurance. For bearer‑style assets (e.g., gold), custody location and bar lists matter.
KYC/AML & Travel Rule. Whitelists, sanctions screening, and originator/beneficiary data exchange are standard for compliant transfers. Expect address‑ownership checks before withdrawals/deposits.
Disclosures & audits. Investors need offering documents, risk factors, valuation policies, and regular attestations (NAV, reserves, coupon payments). Smart‑contract audits and upgrade policies (timelocks, multisig) must be published.
Tax treatment. Jurisdictions differ—some treat income as dividends/interest, others as fund distributions. Capital‑gains rules apply on disposals. Keep auditable records of token lots, corporate actions, and fees.
1) Define your objective. Income (coupons/dividends), diversification, or short‑duration cash management? Your goal determines whether you look at tokenised T‑bills, funds, credit, or real estate.
2) Choose the venue type. Permissioned platforms (KYC, whitelists) suit securities; public‑chain wrappers add composability but still restrict transfers to eligible wallets. Verify the platform’s licences and custody model.
3) Diligence the wrapper and the code. Read the offering docs, redemption and fee policies, and who can pause/upgrade contracts. Confirm oracle sources for NAV/coupons and the SLA for data feeds.
4) Test the rails. Open an account, complete KYC, and do a small deposit/withdrawal. For public‑chain tokens, connect a hardware wallet and verify addresses on‑device.
5) Size positions and monitor. Start small. Track NAV deviations, bid‑ask spreads on secondaries, and any de‑peg from underlying. Set alerts for corporate actions and redemption windows.
6) Plan exit and taxes. Understand lockups, redemption cut‑offs, and where secondary liquidity lives. Export statements monthly for tax reporting.
Tokenisation isn’t about making everything “crypto”—it’s about making finance programmable while preserving legal clarity. The winners will ship boring reliability first—clear rights, clean audits, qualified custody—and then scale liquidity by plugging those tokens into transparent markets. For context on why institutions are leaning in, see:
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