What are tokenized securities?
Tokenized securities are shares, bonds and other securities that are issued, recorded and transferred on a distributed ledger. They carry the same rights as their paper or book-entry versions, and securities law applies to them in full. The German term is Kryptowertpapiere for securities in a crypto securities register under the eWpG.
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Tokenized securities in brief
| Term | Tokenized security, also digital security. German: Kryptowertpapier (eWpG). EU legal term: DLT financial instrument. Tokenized securities explained in one line: securities whose register is a distributed ledger. |
|---|---|
| EU law | MiFID II Article 4(1)(15); Regulation (EU) 2022/858 (DLT Pilot Regime), applies since |
| German law | Gesetz über elektronische Wertpapiere (eWpG), in force since |
| Swiss law | DLT Act, ledger-based securities since |
| Supervisors | BaFin, FMA, FINMA |
| A number | EUR 6 billion: cap on all DLT financial instruments on one DLT market infrastructure (Article 3(2) DLT Pilot Regime) |
What makes a token a security?
A token is a security when it gives its holder the rights of a share, a bond or another transferable security. Since , MiFID II defines financial instruments as the instruments in its Annex I, "including such instruments issued by means of distributed ledger technology" (Article 4(1)(15)).
ESMA's guidelines give the tokenized securities definition in three tests. The token is no instrument of payment, it belongs to a class of interchangeable tokens with the same rights, and it is negotiable on the capital market (ESMA, ). A token that pays regular interest and promises repayment of the principal belongs to a class of securities "similar to bonds". A token with dividend and voting rights on company decisions has features of shares.
How do tokenized bonds work in Germany?
In Germany, a tokenized bond is a crypto security under the eWpG, an electronic security entered in a crypto securities register (section 4(3)). The issuer does not print a certificate and makes an entry in the register instead (section 2(1)). The eWpG covers bearer bonds and shares; bearer shares only in a central register (section 1).
The register has to run on a system that logs data in time order and protects it against unauthorized deletion and later change (section 16(1)). The issuer names the entity that keeps the register; without such a naming, the issuer keeps it (section 16(2)). Keeping a crypto securities register for others needs a BaFin license (section 1(1a) sentence 2 no. 8 KWG).
What does the EU DLT Pilot Regime allow?
The DLT Pilot Regime allows trading venues and settlement systems in Europe to trade and settle tokenized securities with exemptions from some existing requirements (Articles 4 to 6). It applies since and creates three kinds of DLT market infrastructure: a DLT multilateral trading facility, a DLT settlement system and a DLT trading and settlement system that combines both.
| Instrument | Admitted if |
|---|---|
| Shares | Issuer market capitalization below EUR 500 million |
| Bonds and money market instruments | Issue size below EUR 1 billion |
| UCITS fund units | Assets under management below EUR 500 million |
| All instruments on one infrastructure | Total market value up to EUR 6 billion |
Source: Article 3 of Regulation (EU) 2022/858.
What are tokenized stocks and tokenized bonds in practice?
Tokenized stocks and bonds in practice range from securities issued on a ledger to tokens that track a price. Tokenized securities examples cited by the FSB are the digital bonds of the European Investment Bank on a public blockchain in April 2021 and on a private blockchain in November 2022 (FSB, ). The Swiss State Secretariat for International Finance names a CHF 200 million digital bond of the World Bank from 2024.
Some tokens only track the price of a share. ESMA treats tokens that track underlying assets and give rights comparable to buying or selling securities as "a strong indication" of securities-like rights. The benefits claimed for tokenized securities, such as faster settlement, are covered on What is tokenization of assets?
Security tokens vs tokenized securities: what is the difference?
In EU law, security tokens and tokenized securities have the same meaning: both are financial instruments. The FSB distinguishes tokens issued directly on a ledger from digital representations of assets issued elsewhere, and both kinds can be securities. ESMA states that tokenization "should not affect the classification" of financial instruments. The legal line runs between securities and other crypto-assets, the subject of Security tokens vs utility tokens.
Tokenized securities in Germany, Austria and Switzerland
In Germany, the eWpG of governs crypto securities, and BaFin licenses crypto securities registrars under the KWG. Tokenized securities regulation for trading and settlement follows the DLT Pilot Regime and MiFID II.
In Austria, the DLT Pilot Regime applies directly as an EU regulation, and MiCA does not apply to tokens that are financial instruments (Article 2(4) MiCA). The FMA supervises crypto-assets under the MiCA-VVG.
Switzerland is outside the EU. Its DLT Act brought ledger-based securities on and DLT trading facilities on . The State Secretariat for International Finance names SIX Digital Exchange (2021), a digital exchange and central securities depository, and BX Digital, the first DLT trading facility licensed by FINMA (2025). This page gives no legal advice.
Sources
- European Union: Regulation (EU) 2022/858 on a pilot regime for market infrastructures based on distributed ledger technology,
- European Union: Directive 2014/65/EU on markets in financial instruments,
- European Union: Regulation (EU) 2023/1114 on markets in crypto-assets,
- ESMA: Guidelines on the conditions and criteria for the qualification of crypto-assets as financial instruments,
- Financial Stability Board: The Financial Stability Implications of Tokenisation,
- Germany: Gesetz über elektronische Wertpapiere,
- Germany: Kreditwesengesetz, section 1, version of
- Austria: MiCA-Verordnung-Vollzugsgesetz, BGBl. I Nr. 111/2024
- State Secretariat for International Finance: DLT / blockchain / tokenisation, Federal Council releases of and