What is tokenization of assets?

Tokenization of assets means that the ownership record of an asset moves from a paper certificate or a bank database into a token on a shared ledger. The Financial Stability Board notes that tokenisation "has no generally accepted definition" and describes two forms (FSB, October 22, 2024). In the first, an issuer creates the asset directly on the ledger, for example a bond. In the second, the token is a digital representation of an asset issued elsewhere, such as a building or a fund share held by a custodian.

A blockchain is one kind of ledger, and tokenization is what an issuer does on it. The CPMI names distributed ledger technology as the prominent platform today and states that its report does not endorse any particular technology (BIS CPMI, October 21, 2024).

Explained in order, asset tokenization takes six steps, from the legal right to the token and back to the investor.

1. Legal form. The issuer decides what the token stands for: the asset itself, as with a crypto security under the German eWpG, or a claim on an asset held outside the ledger.
2. Custody. An asset outside the ledger goes to a custodian or a special purpose vehicle.
3. Issuance. A smart contract on the ledger creates the tokens and records the first holders.
4. Distribution. The issuer checks investors and admits their wallets. ESMA states that whitelist-only transfers do not on their own stop a token from being a transferable security (ESMA, March 19, 2025).
5. Trading and settlement. Tokens change hands on a trading venue or bilaterally, with payment in central bank money, tokenized deposits or stablecoins.
6. Servicing. Coupons, dividends and fund prices reach the ledger, often through a blockchain oracle.

How to tokenize an asset in practice depends on the law of the country where the asset and the issuer sit.

Financial assets and physical assets can both be tokenized. The FSB lists these examples (FSB, October 22, 2024):

The CPMI names tokenized bond issuance, tokenized commercial bank deposits and tokenized repurchase agreements as projects of regulated institutions. Tokenized securities have their own page: What are tokenized securities?

Sponsors of tokenization projects name faster settlement and fewer intermediaries as their reasons, according to the FSB. The benefits of tokenization that the FSB lists are atomic settlement, where one leg settles only if the other does, automated post-trade processes, smaller investment sizes through fractional ownership, and records that are easier to audit. The FSB adds that "many of the purported benefits of tokenisation have yet to be fully proven" and that atomic settlement may increase liquidity demands on market participants.

Custody risk stays after tokenization. The CPMI writes that custody risk "may therefore apply to both the token and any underlying assets". An investor who holds a token for a bond at a custodian carries the custody risk of that custodian as well.

Germany has a law for electronic securities, the eWpG. Under it, an issuer can issue a bond or a share as an electronic security, and an electronic security counts as a thing (Sache) under the civil code (section 2). A crypto security is recorded in a crypto securities register that must protect data against unauthorized deletion and later change (section 16). Keeping such a register is a financial service that needs a BaFin license under section 1(1a) sentence 2 no. 8 KWG. From the ECB in Frankfurt, the Eurosystem launched Pontes on September 21, 2026: it settles wholesale transactions in tokenized assets in central bank money, with longer operating hours and full features expected by 2028.

In Austria, the EU rules apply directly: the DLT Pilot Regime is a regulation that is "directly applicable in all Member States", and the FMA is the competent authority for crypto-assets under section 1 MiCA-VVG.

Switzerland allowed ledger-based securities from February 1, 2021 and licensed DLT trading facilities from August 1, 2021. The State Secretariat for International Finance names BX Digital as the first DLT trading facility licensed by FINMA (2025) and a CHF 200 million digital bond of the World Bank, settled with central bank money of the SNB (2024). This page gives no legal advice.