Concept
Tokenization of real-world assets (RWA) means issuing digital tokens that represent rights to real assets: treasury bonds, fund units, real estate, private credit. The token record moves onto a blockchain, which enables round-the-clock settlement, fractional ownership, and programmability. For private capital these are familiar assets in a digital wrapper — but which right the token actually represents differs from product to product. Two tokens with identical smart contracts can carry a statutory property right, a fund share, an unsecured claim against an issuer, or nothing at all: the answer sits in the issuance documents and the applicable law, not in the token.
How it works
The diagram below shows where the asset sits, who keeps the record that counts and at which links a separate custodian appears.
The underlying structure is simple. An issuer holds the real asset — a bond, a fund unit, a portfolio of loans — with a custodian or in a dedicated SPV, and issues tokens tied to that asset on a blockchain. Transferring a token changes the token record; legal title and settlement finality depend on the governing records and terms (MAS guide, para. 3.7); the smart contract can restrict the pool of holders by KYC (whitelist), pay a coupon, and execute redemption on schedule. Custody of the tokens themselves is increasingly entrusted to qualified custodians rather than a personal wallet.
A hypothetical example shows which records determine the legal rights. An investor subscribes US$5 million to a tokenized treasury fund: the transfer agent verifies eligibility, whitelists the investor's wallet and enters the subscription in the shareholder register; only then does the smart contract mint 5,000,000 tokens to that address. Dividends accrue daily and are paid monthly as new tokens; on redemption the tokens are burned and the fund pays US$1 per token from its treasury holdings. At every step the wallet balance mirrors an entry the transfer agent made first — the token is the interface, the register is the right. Three trade-offs follow: the record that counts sits wherever the statute or the fund's documents place it, and that is on-chain only in a few regimes; the whitelist and freeze functions that let an issuer repair the ledger after a court order or a lost key also deny the holder the unconditional control self-custody implies; and round-the-clock transferability is a settlement feature, not liquidity.
What Right the Token Contains: Five Legal Models
A token standard such as ERC-20 defines balances and transfer functions — it says nothing about legal content. What the holder actually has is set by three layers of documentation: the issuance terms or prospectus, the custody and account agreements standing behind the issuer, and the law of the jurisdiction that decides whether a ledger entry can carry a property right at all. Real products cluster into five models, and an issuer's marketing page is not evidence of which one applies — only the binding documents are.
1. Direct right in the asset, recognized by statute
A few legal systems allow the token itself to be the legal home of the right. Liechtenstein's Token and TT Service Provider Act (TVTG, in force since January 2020) introduced the token container model: a token is a container that can represent almost any right — ownership, claims, licence rights — and disposal over the token effects disposal over the right it represents; for tokens tied to physical objects, a registered physical validator is responsible for keeping the container matched to the thing.
Switzerland's DLT Act added ledger-based securities (Registerwertrechte, Art. 973d ff. of the Code of Obligations): under a registration agreement the right exists in, and can be claimed and transferred only through, a qualifying securities ledger that gives creditors power of disposal and integrity guarantees — the ledger transfer itself is the legal transfer, with protection for good-faith acquirers.
Germany's Electronic Securities Act (eWpG, in force 10 June 2021) reaches the same result by deeming an electronic security a thing under § 90 of the Civil Code (§ 2(3)), so that property law and good-faith reliance on the register (§ 26) apply; a crypto security is entered in a crypto securities register kept on a tamper-proof decentralised system (§ 16) by a BaFin-licensed registrar, and since the Future Financing Act of 15 December 2023 registered shares, not only bonds and fund units, can be issued that way.
In all three regimes the on-chain record and the legal position coincide by operation of law; the pinpoints are in the table below. It is the strongest model and the rarest: the issuer must deliberately constitute the instrument under such a statute, and the statute must cover the asset class — Swiss ledger-based securities hold rights such as shares and bonds, not title to a bar of gold or a building, and the TVTG needs a registered physical validator (Art. 2(1)(p)) precisely because a token cannot by itself deliver a physical object.
Property in the token is not property in the underlying. Two recent common-law reforms are often cited as if they belonged in this model, and they do not. The UK's Property (Digital Assets etc) Act 2025 (in force 2 December 2025) provides only that a digital thing is not prevented from being an object of personal property rights because it is neither a thing in possession nor a thing in action; Article 12 of the US Uniform Commercial Code (2022 amendments, enacted in more than thirty states, in New York from 3 June 2026) lets a qualifying purchaser take a "controllable electronic record" free of competing property claims (§ 12-104(e)) but leaves to other law whether the record carries any right in what it evidences (§ 12-104(c)). Both settle that a token can be owned; a token that is unquestionably property under either statute can still be nothing more than a model-3 claim or a model-5 exposure.
| Regime | In force | What the ledger entry carries | Who keeps or controls the register |
|---|---|---|---|
| Liechtenstein TVTG | 1 January 2020 | Any right the token is designed to represent — ownership, claims, membership rights (Art. 2(1)(c)); disposal over the token is disposal over the right (Art. 7(1)) | The TT system; a registered physical validator for tokens tied to physical objects (Art. 2(1)(p)) |
| Switzerland, Art. 973d ff. CO (DLT Act) | 1 February 2021 (CO); 1 August 2021 (DEBA, Banking Act) | Rights constituted as ledger-based securities under a registration agreement — shares, bonds, other rights capable of being securitised | A securities ledger meeting Art. 973d(2): creditors, not the obligor, hold power of disposal; integrity secured; content and rules recorded; entries verifiable by creditors |
| Germany eWpG | 10 June 2021; registered shares since 15 December 2023 | The electronic security itself, deemed a thing (§ 2(3)): bearer bonds, fund units, registered shares | Crypto securities register on a tamper-proof decentralised system (§ 16), kept by a BaFin-licensed registrar |
| UK Property (Digital Assets etc) Act 2025 | 2 December 2025 (England and Wales, Northern Ireland) | Only that the digital thing can itself be an object of property rights (s. 1) | None — the Act creates no register |
| US UCC Article 12 | State by state; more than thirty states by January 2026, New York from 3 June 2026 | Rights in the controllable electronic record itself (§ 12-104(d)); rights in what it evidences only where other law says so (§ 12-104(c)) or for tethered controllable accounts and payment intangibles | Whoever has "control" (§ 12-105): substantially all the benefit plus the exclusive power to exclude others |
| Regime | Good-faith acquirer / lost key | What it does not reach |
|---|---|---|
| Liechtenstein TVTG | Acquirer for value in good faith protected (Art. 9); lost token cancelled by the court (Art. 10) | Physical delivery — the validator, not the ledger, answers for the object |
| Switzerland, Art. 973d ff. CO (DLT Act) | Protected unless in bad faith or grossly negligent (Art. 973e); cancellation by the court (Art. 973h) | Title to physical assets or land — only rights that can be securitised |
| Germany eWpG | Good-faith reliance on the register content (§ 26) | Anything outside the listed security types; the registrar remains a supervised intermediary |
| UK Property (Digital Assets etc) Act 2025 | Not addressed by the Act; general law applies | The underlying asset: the Act is silent on what the token represents |
| US UCC Article 12 | Qualifying purchaser takes free of property claims (§ 12-104(e)); no statutory lost-key procedure | The underlying asset, unless separately transferred under its own law |
2. Security or share in an SPV that owns the asset
The token represents a conventional security — a share, bond or note — issued by a vehicle that owns the underlying. BlackRock's BUIDL is the reference case: the token is a share in BlackRock USD Institutional Digital Liquidity Fund Ltd., a British Virgin Islands fund offered under Rule 506(c) and Section 3(c)(7) to qualified purchasers with a US$5 million initial minimum. Bank of New York Mellon custodies the fund's treasuries and cash; Securitize acts as transfer agent and tokenization platform. The holder is a shareholder: income accrues as daily dividends paid monthly in new tokens, redemption runs at a stable US$1 per token through the fund, and transfers work only between pre-approved (whitelisted) investors.
Under BUIDL's own arrangement the transfer agent's off-chain register remains the official record of share ownership, with the blockchain as a mirror. That is a choice made in the fund's documents, not a rule of law: Franklin Templeton's OnChain U.S. Government Money Fund (FOBXX), a 1940 Act money-market fund in which one share is one BENJI token, states that its transfer agent maintains the official record of share ownership through a proprietary blockchain-integrated system — the same model 2, with the register placed on-chain by the transfer agent itself.
On 2 September 2026 the SEC proposed the first broad revision of its transfer-agent rules since the 1980s, addressing agents that keep securityholder records on a distributed ledger; it is a proposal with a 60-day comment period, not yet law. In either variant the holder's rights are those of a shareholder in the vehicle — the token changes how the register is kept, not what a share is.
3. Contractual claim against the issuer
The token is a debt instrument or contractual promise: the holder owns none of the underlying and instead holds a claim against the issuing entity. Backed's xStocks are the clean example: each token is a bearer debt instrument classified as a tracker certificate, issued by Backed Assets (JE) Limited, a Jersey SPV, under a base prospectus approved by the Liechtenstein Financial Market Authority under the EU Prospectus Regulation. The certificate tracks a listed share's price but confers no shareholder rights and no voting; the underlying shares are held as collateral in segregated custody accounts, and a three-party account control agreement lets an independent security agent seize and liquidate the collateral for holders if the issuer defaults.
Most stablecoins and other digital-dollar instruments sit in this model too: a redemption claim against the issuer, with quality depending entirely on the reserve and the legal package around it — and here statute has begun to rewrite the default outcome.
Once effective, GENIUS §11 gives holders of a permitted issuer's payment stablecoins priority in required reserves. If those reserves are insufficient, §11(d) also gives the remaining claim first priority against the issuer's estate to the extent §4 required additional reserves. Customer property held by a regulated custodian is covered separately by §10, with its statutory conditions and exceptions. The Act's effective date is the earlier of 18 January 2027 or 120 days after the primary federal regulators issue final implementing regulations (§20). Under MiCA the holder of an e-money token has a claim against the issuer redeemable at par at any time (Art. 49), while Art. 2(4)(a) keeps anything that qualifies as a financial instrument — a tokenized bond or share — outside MiCA altogether.
A tokenized bank deposit is the same model with a bank as obligor: a deposit claim with whatever deposit protection the bank's charter provides. Outside such regimes, and without a perfected security interest, the holder of a model-3 token is an unsecured creditor, however well collateralized the marketing says the product is.
4. Beneficial or economic interest through a structure
Legal title to the asset sits with a custodian or trustee, and the holder has beneficial ownership carved out by contract or trust law. PAX Gold (PAXG) is documented this way: the Paxos terms describe the token as "akin to a warehouse receipt representing your beneficial ownership of a pro rata portion of Allocated Gold," with Paxos Trust Company, N.A. holding the gold on a segregated basis in LBMA-approved vaults for the benefit of holders.
Redemption runs three ways — allocated London Good Delivery bars from a 430-token minimum, unallocated Loco London gold, or dollars. Two further terms matter more than the warehouse-receipt language: Paxos issues PAXG under specific approval from the OCC, and the terms reserve to Paxos the right to freeze all PAXG tokens and oblige it to comply with any legal directive to freeze a user's access — so even the model-4 holder's on-chain control is conditional.
The holder's real protection is not the blockchain entry but whether the segregation holds in a custodian insolvency — a question of trust and custody law in the custodian's jurisdiction, examined for securities in the custody chain analysis; Swiss Art. 16 of the Banking Act, which since August 2021 counts crypto-based assets kept available for the client at all times among custody assets outside the bank's estate, shows what a statutory answer looks like.
5. Synthetic exposure
No asset is held for the holder at all: a token or a derivative position tracks the price of the underlying through collateral pools, funding payments or swap mechanics. This is an analytic category rather than a single documented product type — it covers synthetic trackers, perpetual-style exposure and index tokens whose issuer holds unrelated collateral or none. The holder has, at best, a claim on a counterparty's or a protocol's collateral performing as designed; if the mechanism fails, there is no underlying to point to and often no identifiable obligor to sue. Synthetic products can be legitimate exposure instruments, but they are not ownership in any legal sense.
The five models answer the same seven questions differently — title, counterparty, register, transfer, income, redemption and default — and the comparison is where product differences become visible.
| Model | Title to underlying | Counterparty | Authoritative register |
|---|---|---|---|
| Direct statutory right (TVTG; Art. 973d CO) | Holder holds the right itself | Obligor of the underlying right | The qualifying ledger, by statute |
| Security / SPV share (BUIDL) | None directly; the fund owns the assets | The fund / SPV | Transfer agent's register; blockchain as mirror |
| Claim on issuer (Backed xStocks) | None; contractual claim only | Issuing SPV | Issuer's records per the instrument's terms |
| Beneficial interest (PAXG) | Beneficial ownership; legal title via custodian | Custodian / trustee | Custodian's allocation records plus on-chain balance, per terms |
| Synthetic exposure | None | Derivative counterparty or protocol | Protocol or counterparty state |
| Model | What transfers the right | Income | Redemption |
|---|---|---|---|
| Direct statutory right (TVTG; Art. 973d CO) | Ledger transfer is the legal transfer | Whatever the right yields (coupon, rent) | Per the instrument's own terms |
| Security / SPV share (BUIDL) | Transfer-agent entry between whitelisted holders | Dividend or coupon of the security | Via the fund at NAV / stated value |
| Claim on issuer (Backed xStocks) | Transfer per the terms of the debt instrument | Only if the terms promise pass-through | Contractual; often restricted to professional investors |
| Beneficial interest (PAXG) | On-chain transfer recognized by the terms | Usually none for commodities; per structure otherwise | Physical, unallocated or fiat, per terms |
| Synthetic exposure | Position transfer or close-out | Funding / price difference | Close-out only |
| Model | Issuer default / insolvency |
|---|---|
| Direct statutory right (TVTG; Art. 973d CO) | Right survives; enforced under the asset's own law |
| Security / SPV share (BUIDL) | Fund assets stay in the fund; holder ranks as shareholder; manager failure is not fund failure |
| Claim on issuer (Backed xStocks) | Unsecured creditor — unless a security agent holds perfected collateral for holders |
| Beneficial interest (PAXG) | Segregated property should fall outside the estate — depends on trust/custody law holding |
| Synthetic exposure | Pure counterparty loss; often no obligor to pursue |
The practical reading of the matrix: only model 1 makes the blockchain the legal register by statute; models 2–4 keep the decisive records and protections off-chain, in transfer-agent books, collateral agreements or custody law; model 5 has no underlying protection to locate at all.
Technological Record vs Legal Transfer
An on-chain transfer always moves the entry; whether it moves the right is a separate, jurisdiction- and document-specific question. Under the Liechtenstein TVTG and Swiss Art. 973d CO the two coincide because the statute says so — the ledger movement is the disposition. Everywhere else, the token's movement is legally effective only insofar as the governing documents adopt it: BUIDL transfers are processed between whitelisted wallets and reflected by the transfer agent, whose register remains the official record; a Backed certificate transfers under the terms of the debt instrument; a PAXG transfer is recognized because the Paxos terms say the on-chain holder is the beneficial owner. The same logic runs in reverse — a legal transfer can exist without an on-chain movement (a court order, an inheritance, an enforcement sale), and the issuer's documents then determine how the ledger is corrected, typically through freeze, burn and re-issue functions built into the contract.
Failure Scenarios: What the Documents Decide
Four situations expose the difference between the entry and the right better than any definition. In each, the outcome is written in identifiable documents — the issuance terms, the custody agreement, the applicable statute — not in the protocol.
Lost private key
The asset-level right usually survives; access to it depends on the model. In model 2, the transfer agent's off-chain register still shows the shareholder, and reconstitution is an administrative procedure with the transfer agent. In models 1 and 4 the answer sits in the statute or the terms: TVTG-style frameworks contemplate cancellation procedures for lost tokens, while the PAXG terms contain no key-recovery mechanism — self-custodied PAXG lost with the key is lost unless Paxos' whitelist tooling and terms allow reissue. A permissionless model-3 or model-5 token with no issuer freeze function is simply gone. Key loss is also the standard failure mode in estate planning for digital assets: the heirs' legal entitlement is clear, their practical access is not.
On-chain transfer without the required legal transfer
A token moves to a buyer, but a condition of legal transfer fails — the acquirer was never whitelisted and eligible, the sale violated securities restrictions, or the seller lacked authority. In model 1 the statute protects a good-faith acquirer through the ledger itself. In model 2 the transfer agent will not register an ineligible holder, so the buyer holds an entry without the share — Rule 506(c)/3(c)(7) products legally exist only among qualified purchasers. In models 3 and 4, the issuance terms decide whom the issuer must treat as holder; a transfer that breaches them can leave the token in a wallet the issuer is entitled to ignore or freeze. The purchase price is then a claim against the seller, not a right in the asset.
Issuer default with the underlying intact
The issuer fails while the treasuries, shares or gold sit safely with a custodian. Here the models diverge most sharply. Model 2: the fund's assets are the fund's property — a manager's or transfer agent's failure does not put portfolio assets into the manager's estate, and shareholders continue to own the fund. Model 3: holders are creditors; xStocks holders rely on the security agent enforcing the account control agreement over segregated collateral, and without such a package they queue with unsecured creditors while the "backing" sits in the estate. Model 4: the question is whether segregation and beneficial ownership survive the custodian's insolvency under the applicable trust or custody law — if yes, the gold is not estate property; if the structure was defective, holders become creditors. Model 5 offers only a close-out claim.
Swiss law illustrates how a statute can settle this: Art. 242a of the Debt Enforcement and Bankruptcy Act (in force 1 August 2021) obliges the bankruptcy administration to hand crypto-based assets over to a third party who claims them if the debtor had undertaken to keep them available for that party at all times and they were allocated to the party individually or held in a pool with a determinable share; a claimant whose demand is rejected has 20 days to sue or loses the claim, and bears the cost of the surrender.
The platform holding the tokens fails
The failure private clients most often meet involves neither the issuer nor the vault but the exchange or custodian holding the tokens for them. Three insolvencies must be kept apart — the token issuer's (models 2–5), the underlying custodian's (model 4) and the token custodian's — and the third is governed by the custodian's own terms and insolvency law, whatever model the token follows.
In re Celsius Network LLC (Bankr. S.D.N.Y., 4 January 2023) fixed how such terms are read: some 600,000 customers had placed about US$4.2 billion of crypto-assets in Earn accounts whose Terms of Use (version 8) granted Celsius "all right and title to such Eligible Digital Assets, including ownership rights" and allowed it to pledge, rehypothecate, sell or lend them. The court held the clickwrap terms unambiguous and enforceable under New York law and ruled that Earn assets became property of the estate on deposit — customers were unsecured creditors, not owners — while leaving Custody-programme assets and individual fraud or contract-formation defences undecided.
The ratio carries over to RWA: whether a token held through an intermediary is the client's property or the intermediary's is answered by the custody agreement, not by the blockchain, and a tokenized treasury-fund share in an Earn-style account would have gone the same way. Segregated custody under a trust or banking charter and statutory routes such as Swiss Art. 242a exist to produce the opposite answer; the custody choices open to a private client are set out in crypto for private wealth.
History
The idea grew out of the crypto market, but in 2024–2025 traditional finance picked it up. The launch of BlackRock's BUIDL fund in March 2024 showed that the largest managers were ready to issue tokenized products: the fund started at $100 million and passed $1 billion within a few months. Following BlackRock came Franklin Templeton with its BENJI fund, Ondo, Securitize, and others; by 2026 tokenization had gone from an experiment to a distinct line of institutional products.
Market Size
By mid-2026 the value of tokenized RWA on-chain, excluding stablecoins, had passed $30 billion — the market roughly tripled over the year. The largest segments are private credit and tokenized US treasuries: treasuries account for around $13–15 billion, and BUIDL remains the leading product with assets of about $2.4 billion. These are 2026 estimates and the figures move quickly.
Beyond treasuries, several other classes have passed the $1 billion mark: private credit, commodities, corporate bonds, non-US government bonds, and institutional alternative funds. Private credit is one of the fastest-growing segments — a token conveniently splits large, illiquid loans into fractions. Analysts at BCG and Standard Chartered estimate the market's potential at $16 trillion by 2030; that is a forecast, but it shows the scale of institutional expectations.
Stablecoins
A separate and the most mature class is stablecoins — tokens pegged to a fiat currency. Their combined capitalization by mid-2026 stood at around $300 billion, and they have become the settlement infrastructure on top of which the tokenization of other assets is built. Their types, structure, risks, and regulation are covered in a dedicated article, Stablecoins: types and regulation — what follows here concerns only the tokenization of assets themselves.
Regulation
Regulators caught up with the market in 2024–2026. The stablecoin perimeter is already in place — in the EU that is MiCA, with its split into EMT and ART, and in the US the GENIUS Act (July 2025); it is examined in detail in the article on stablecoins.
For the tokenization of securities themselves, experimental DLT regimes are at work — the EU DLT Pilot Regime (Regulation 2022/858, applicable since 23 March 2023), which lets DLT market infrastructures trade and settle tokenized financial instruments under exemptions from parts of CSDR and MiFID II while confirming that a DLT-issued instrument remains a financial instrument — within limits: shares only of issuers with a market capitalisation below €500 million, bonds with an issue size below €1 billion, fund units with assets under management below €500 million, an aggregate cap of €6 billion per infrastructure and a mandatory transition strategy once €9 billion is reached (Art. 3) — and the UK's Digital Securities Sandbox, open to applications since 30 September 2024 for digital securities depositories and trading venues and scheduled to run until December 2028.
The property-law layer is developing separately from the market-infrastructure layer: Liechtenstein's TVTG, the Swiss DLT Act and Germany's eWpG, described above, are the three European statutes that make the token itself a carrier of rights, while in the US the SEC's September 2026 transfer-agent proposal would allow blockchains to serve as the official ownership record for securities. The market's structure beyond stablecoins has not yet been settled in US law: the CLARITY Act cleared the relevant Senate committee in spring 2026 but has not yet been enacted and must be reconciled between the chambers. In parallel, a tax perimeter is taking shape — through CARF the OECD is introducing automatic exchange of information on crypto-assets: data collection began in 2026, the first exchanges will take place in 2027, and for some jurisdictions in 2028. For a token holder, reporting on them is gradually coming into line with CRS and FATCA.
Application for Private Capital
For a wealthy client, tokenization opens access to institutional products in digital form, to settlement without weekends, and to fractional ownership of large assets. The familiar questions remain, though: the issuer's jurisdiction, custody of the keys and holding the tokens with a qualified provider, tax status, and reporting — plus a question specific to tokenization: which of the five models above the product follows, checked against its binding documents rather than its marketing.
Risks and Limitations
A token does not remove the risks of the underlying asset and adds its own. The secondary market is often thinner than for a conventional security, so a quick exit at a fair price is not guaranteed. On top of credit and interest-rate risk come smart-contract and operational risk, the risk of the token's issuer and custodian, and the safekeeping of private keys. Stablecoins have a distinct vulnerability — a break in the peg: in March 2023 USDC temporarily lost parity because of reserves stuck in the failed Silicon Valley Bank. Finally, regulation is still fragmented: the same token is classified differently across jurisdictions, and the same product can sit in different models of the matrix above depending on which country's law tests it.
What's Next
Institutional money keeps coming in: in May 2026 BlackRock filed applications with the SEC for new tokenized funds and on-chain shares of a large money-market fund. Regulation is maturing — GENIUS has the effective-date formula described above, CARF reporting starts at the same time, and the SEC's transfer-agent proposal, if adopted, would let the blockchain become the official register for model-2 products. On the horizon are network interoperability and "money-against-asset" settlement directly on the blockchain, without a separate clearing step. For private capital this means access to new products with the same due diligence as in classic private banking.
Tokenization moves familiar assets onto a blockchain, adding settlement speed and fractional ownership while retaining credit, counterparty, and technology risk. With the arrival of MiCA, the GENIUS Act, and CARF, the segment is becoming increasingly regulated: the rules on issuance, collateral, and tax reporting are gradually catching up with practice.
Where to Tokenise: Seven Jurisdictions Compared
The five legal models tell a holder what a token contains; the issuer's jurisdiction decides which models are available at all, which licence the platform needs and who may buy. Seven centres account for most private-wealth tokenisation, and they split cleanly between those whose statute makes the ledger entry the legal record and those that regulate the token as whatever security or fund unit it already is.
| Jurisdiction | Ledger entry as the legal record | Typical wrapper | Licence or approval | Who may buy |
|---|---|---|---|---|
| Luxembourg | Yes for unlisted securities: Law of 20.12.2024 (Blockchain Law IV) adds equity and fund units to the 2021 debt regime | Securitisation vehicle, RAIF or UCITS unit | A control agent or central account keeper supervised as a settlement body, EU bank or investment firm | Well-informed investors for a RAIF; retail through a UCITS |
| Liechtenstein | Yes for any right: TVTG token container, 1 January 2020 | Company, foundation or SPV issuing TVTG tokens | Registration of TT service providers with the FMA; EEA prospectus rules for security tokens | Retail under an EEA prospectus; otherwise private placement |
| Switzerland | Yes for securitisable rights: ledger-based securities, art. 973d CO | AG shares or bonds as ledger-based securities | FINMA licence for a DLT trading facility (art. 73a FinMIA) when tokens are traded | Qualified or retail investors under the Financial Services Act |
| Singapore | No TVTG analogue; the token is the product it represents | Capital markets product, often a VCC fund unit | SFA licensing for dealing, platforms and custody; MAS Guide of 14.11.2025 applies substance over form | Accredited investors under exemptions; retail only with a prospectus |
| Hong Kong | No TVTG analogue; tokenised securities remain securities | SFC-authorised fund or bond | SFC product circular revised 20 April 2026; separate intermediary circular of 2 November 2023; secondary trading on licensed VATPs subject to SFC safeguards | Retail for SFC-authorised products; professional investors otherwise |
| UAE | No TVTG analogue; separate issuance approval per token | Asset-referenced virtual asset in Dubai; security token in ADGM | VARA ARVA rules for Dubai outside DIFC; issuer approval and rights-specific duties; ADGM has a separate FSRA regime | Set per approval; ADGM security tokens follow securities rules |
| United States | Only rights in the record itself: UCC Article 12; the SEC transfer-agent proposal of September 2026 pending | Registered fund (BENJI) or private fund (BUIDL) | SEC-registered transfer agent; broker-dealer for distribution | Retail in a registered fund; accredited investors or qualified purchasers in private placements |
The first column is the one that decides model 1. Only three of the seven — Liechtenstein, Switzerland and, since 2024 for equity and fund units, Luxembourg — let an issuer constitute the right on the ledger, so that transferring the token transfers the right by operation of law. Singapore, Hong Kong and the UAE have built some of the most active tokenisation markets without such a statute: the token is a digital form of a fund unit, bond or share governed by ordinary securities law, and the register of record stays off-chain. That is not a gap for a holder of a money market fund token, whose protection comes from fund regulation and a custodian, but it is a gap for anyone tokenising a physical asset or an unlisted share, where the question "does the token carry title?" has no statutory answer.
The MAS and SFC rules assess the rights represented by a token and add technology and recordkeeping safeguards to the applicable product rules. In Dubai outside DIFC, VARA's ARVA rules require rights-specific disclosure. Reserve duties depend on the rights and any stable-value undertaking; monthly disclosures and six-month audits cover reserve assets where applicable. Where a token purports to convey direct ownership, that right must be legally established and the underlying title-transfer requirements satisfied. A token transfer alone is not proof that those formalities were met.
The investor column is where the jurisdictions actually diverge for private capital. Hong Kong and US registered funds are the only routes on the list that reach retail buyers with a tokenised money market product today; Luxembourg reaches them through UCITS, which is why Blockchain Law IV was marketed as a route to retail distribution of private funds. Everywhere else a tokenised product is a private placement, and the token does not change the minimums or the investor tests.
Issuer or holder goal → jurisdiction
| Goal | First choice | Why |
|---|---|---|
| Transfer of legal title by the token itself, including non-securities | Liechtenstein | TVTG covers any right, with a physical validator for objects |
| Swiss company shares or bonds traded on a DLT venue | Switzerland | Ledger-based securities plus a licensed DLT trading facility |
| EU-distributed fund units on a ledger | Luxembourg | Blockchain Law IV plus the RAIF and UCITS passports |
| Tokenised money market fund for Asian retail | Hong Kong | Retail authorisation and weekend trading on licensed platforms |
| Institutional tokenised funds in Asia | Singapore | VCC structure, Project Guardian network, accredited-investor exemptions |
| Real estate or commodity token for Gulf investors | Dubai (VARA) | One issuance approval per token for assets outside securities law |
| US investors | United States | Registered fund for retail, private placement for accredited investors |
Q/A
Does holding an RWA token make me the direct owner of the underlying asset?
Not necessarily. The governing documents may give the holder direct or indirect ownership, a security entitlement, a contractual claim against an issuer, or only synthetic exposure. The blockchain record does not answer that legal question; the issuance terms and applicable property law do.
Which documents actually determine my legal position as a token holder?
Three layers: the issuance terms or prospectus (what the token is — share, debt, beneficial interest), the custody and collateral agreements behind the issuer (where the underlying sits and for whose benefit), and the statute of the governing jurisdiction (whether a ledger entry can carry the right at all). A product's website or presentation is not one of them.
Does tokenization protect me if the issuer or custodian fails?
Not by itself. Protection depends on enforceable segregation of the underlying asset, the custody chain, redemption rights, insolvency treatment and who controls the relevant records or keys. A correct on-chain balance cannot cure a weak legal claim or remove issuer and custodian counterparty risk.
If I lose my private key, do I lose the asset?
It depends on the model and the issuer's tooling. Where an off-chain register is official — a tokenized fund with a transfer agent — the shareholder is still on the books and tokens can be reconstituted administratively. Where the terms treat the on-chain holder as owner and provide no recovery mechanism, as with self-custodied commodity tokens, a lost key can mean a lost asset. A permissionless token with no issuer freeze function has no repair path at all.
If a token is transferred on-chain to someone not entitled to hold it, who owns the asset?
Outside statutory ledger regimes, the legal transfer requires more than the on-chain movement: eligibility, whitelist status and the instrument's transfer terms. A transfer agent will not register an ineligible buyer, and an issuer may freeze or ignore a token held in breach of the terms — the buyer is left with a claim against the seller, not a right in the asset.
Is a tokenized security outside ordinary securities regulation?
No. Tokenization changes the recording or transfer technology, not automatically the legal nature of the instrument. A share, bond or fund interest can remain a financial instrument or security; the EU DLT Pilot Regime is a supervised framework for eligible infrastructure, not a blanket exemption.
Does round-the-clock blockchain settlement guarantee liquidity?
No. Technical availability for transfer or settlement does not create buyers, market depth or reliable pricing. A token can trade continuously and still have a thin or restricted secondary market, large bid–ask spreads, transfer whitelists or no practical redemption route at the time the holder needs to exit.
Is a stablecoin the same product as a tokenized bond or fund unit?
No. A stablecoin is designed around a value reference and its own issuer or reserve claim, while a tokenized bond or fund unit represents the rights of that financial instrument. The legal classification, redemption promise, asset backing and regulatory regime must be checked separately for each product.
Is a "fully collateralized" tracker token as safe as owning the underlying?
No. A tracker certificate is a debt claim against its issuer: collateral helps only if a perfected security interest and an enforcement mechanism — such as an independent security agent with control over the collateral accounts — actually exist for holders. Without them, the collateral belongs to the issuer's estate in insolvency and the holder is an unsecured creditor.
If UK or US law now says a token is "property", does that give me the underlying asset?
No. The Property (Digital Assets etc) Act 2025 says only that a digital thing can be the object of personal property rights, and UCC Article 12 gives a qualifying purchaser clean title to the controllable electronic record while leaving to other law whether the record carries any right in what it evidences (§ 12-104(c)). Both settle who owns the token; what it entitles the owner to comes from the issuance documents or, under the TVTG, Art. 973d CO or the eWpG, from a statute that binds the right to the ledger.
Does MiCA regulate tokenized bonds, shares or fund units?
No. Art. 2(4)(a) MiCA excludes crypto-assets that qualify as financial instruments under MiFID II, so a tokenized bond or share stays under securities law and, for trading and settlement, the DLT Pilot Regime. MiCA governs e-money tokens, asset-referenced tokens and other crypto-assets: an e-money token is a model-3 claim on its issuer redeemable at par at any time (Art. 49), not a tokenized security.
My tokens sit with an exchange or platform, not in my own wallet — whose insolvency should I worry about?
Three, separately: the token issuer's (what the token is worth), the underlying custodian's (whether the asset behind a model-4 token survives) and the platform's (whether the tokens are yours at all). The third is decided by the platform's custody terms — in Celsius the Earn terms transferred title to the platform and customers became unsecured creditors — and by whether the platform's law, as Swiss Art. 242a DEBA does, lets clients reclaim segregated assets from the estate.
Why do Singapore and Hong Kong lead in tokenised funds without a TVTG-style statute?
Because a fund unit does not need one. Its protection comes from fund regulation, a custodian and the off-chain register of unitholders, all of which the MAS guide of 14 November 2025 and the SFC product circular revised 20 April 2026, alongside the separate 2023 intermediary rules, leave in place. A statute that makes the ledger entry the legal record matters for shares, bonds and physical assets, where title itself is the point.
Does tokenising a private fund open it to retail investors?
No. The token changes the register, not the investor test: a RAIF stays with well-informed investors and a US private fund with accredited investors or qualified purchasers. Retail access comes from the wrapper — a UCITS, an SFC-authorised fund or a US registered fund — which is why Luxembourg's Blockchain Law IV matters mainly for fund units that are already retail-eligible.