Tokenized Securities

A token counts as a security under EU law when it carries the rights a security carries: a claim on an issuer's cash flows, a share of ownership, or a right to repayment with interest. MiCA, the EU's crypto-asset regulation, explicitly excludes these instruments; a tokenized share or bond stays regulated under MiFID II and national securities law, the same rulebook that already applies to a paper or book-entry security. The form a security takes and the infrastructure that records and transfers it can change with tokenization; the rights that come with holding it stay set by the same securities law as before. That distinction decides which regulator an issuer talks to and which prospectus rules apply, well before the question of which blockchain the token runs on.

Germany's Elektronische Wertpapiergesetz (eWpG), in force since June 2021, lets an issuer create a security without a paper certificate for the first time in German law. The eWpG sets up two kinds of register: a central register, kept by an established central securities depositary such as Clearstream, and a crypto securities register, which can run on a blockchain. Either way, the law names a registrar who carries legal responsibility for the entries, so an investor's claim always traces back to an accountable party, not only to a blockchain address.

The EU's DLT Pilot Regime, Regulation (EU) 2022/858, gives a trading venue or a settlement system temporary exemptions from parts of the standard securities rulebook so it can run trading and settlement of tokenized securities on a blockchain under close supervisory watch. A normal exchange keeps trading and settlement in separate systems run by separate companies; the pilot regime allows one licensed operator to combine both functions for tokenized securities, which is the structural change that lets a trade settle in minutes. Frankfurt-based 21X holds one of only a handful of licenses issued under the regime in the EU. The regime runs until 2026 with a possible extension, after which the European Commission will decide whether to fold its lessons into permanent law.

Tokenized bonds are the most advanced example: Siemens issued a 300 million euro digital bond in 2024, settled in central bank money through the Deutsche Bundesbank's Trigger Solution, and 360X later carried out the bond's first secondary trade between DekaBank and Union Investment. On the fund side, tokenized funds from BlackRock and Franklin Templeton represent fractional ownership of a fund's underlying securities as a token. In the US, the clearing organization DTCC built Smart NAV with Chainlink to publish a fund's net asset value across several blockchains through a single connection, so a security's core data stays consistent no matter which chain a token representing it lives on. The Deutsche Bundesbank's Monthly Report article Digital money: options for large-value payments in central bank money sums up the Eurosystem's trials of settling such trades in central bank money: 64 participants from nine European countries ran more than 200 transactions in 58 use cases and settled around 1.6 billion euros.

Finance Loop announced a strategic cooperation with 21X, the Frankfurt trading venue for tokenized securities regulated under the DLT Pilot Regime, and tokenized securities were a topic at Tokenization & On-Chain Capital Markets, a Point Zero Forum side event in Zurich where 21X, Franklin Templeton, DFNS and AMINA spoke. At the Frankfurt Forum on Digital Assets & Applications, organized by d-fine, DekaBank, 360X, 21X and Seturion discussed DLT-based market infrastructures.

Christoph Hock of Union Investment is among the speakers of Capital & Code in Frankfurt, where Finance Loop is a media partner. Gubbi, a Finance Loop Premium Partner, runs the GDX Primary Market for digital assets and brings events on RWA tokenization and the eWpG into the network. Finance Loop is also a partner of the Forum für Digitale Vermögenswerte, a German-language forum in Frankfurt whose topics include tokenized securities and digital custody. Tokenized securities sit in Finance Loop's Investment & Digital Assets track. Related pages: tokenized bonds, RWA tokenization and tokenization in Germany.

A tokenized security is a stock, a bond or another financial instrument whose ownership record runs on a blockchain instead of a conventional register, while its legal rights stay governed by the same securities law as any other security of its kind.

The two terms overlap but are not always used the same way. A tokenized security is an existing kind of financial instrument, such as a share or a bond, issued or represented as a token. "Security token" is sometimes used more broadly for any token whose legal treatment depends on the rights it carries. The rights a token carries and the jurisdiction it falls under decide whether it counts as a security, so a reader should check both before relying on either term.

The Elektronische Wertpapiergesetz (eWpG), in force since June 2021, lets an issuer create a bond or other security without a paper certificate, recorded either in a central register or in a crypto securities register that can run on a blockchain.