What are Tokenized Securities?

Tokenized securities are simply traditional financial assets (stocks, bonds, ETFs, etc.) issued in digital form on a blockchain. Tokenized securities embed the rights and obligations of conventional securities (voting rights, dividends, interest, etc.) into digital tokens but do not change their underlying legal status. Existing securities laws also still apply even if the security is tokenized.

Why tokenize stocks, ETFs, and bonds?

Tokenizing securities offers several practical benefits, primarily due to blockchain’s automation and ability to fractionalize assets. Key advantages include:

• Faster settlement: Blockchain tokens enable near-instant ownership transfers, while traditional securities typically settle in one to three days (T+1 or T+2). Token trades can settle in seconds or minutes, reducing counterparty risk and accelerating capital availability.
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• 24/7, global trading: Tokenized stocks can trade continuously, 24 hours a day, seven days a week. The NYSE has stated its upcoming token-trading platform will operate around the clock, enabling global investor participation beyond local exchange hours.
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• Lower costs: Blockchains can reduce reliance on intermediaries such as custodians, transfer agents, and clearinghouses. Token issuance and trading automate processes like dividend payments and proxy voting, potentially lowering fees and operational costs for issuers and investors.
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• Greater transparency and auditability: Each token transfer is recorded on a public or permissioned ledger, providing a single, verifiable source of ownership and transaction history. This reduces discrepancies and allows regulators and holders to verify records immutably.
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• Accessibility and inclusivity: Blockchain infrastructure enables new funding methods and direct-to-investor platforms. Tokenizing stocks or ETFs can expand access to global, crypto-savvy investors. On- and off-ramps to fiat also make it easier to connect blockchain assets with traditional banking, broadening access to previously restricted assets.

Collectively, these benefits can enhance market liquidity and efficiency. Decentralized markets may offer tighter spreads on tokenized government bonds and enable instant institutional trades.

Types of tokenized securities

Tokenization can be issuer-sponsored or third-party–sponsored. The US Securities and Exchange Commission (SEC) distinguishes these models, which are explained further below.

Issuer-sponsored tokenized securities

In the issuer-sponsored model, the original issuer of a security decides to issue or record that security on a blockchain. Essentially, the company or fund issues its shares directly in token form (or maintains a blockchain-based register alongside the old register). The issuer (or its agent) integrates distributed ledger technology into its “master securityholder file,” so that moving a token on the network automatically updates the official shareholder record. Apart from the tech layer, this tokenized share retains the same voting rights, dividends or coupons, and regulatory status. The SEC stressed that issuing a security token doesn’t by itself change its legal character.

Holders of issuer-sponsored tokenized securities can often switch between on-chain and off-chain formats if permitted by the issuer. Some issuers maintain a traditional share registry while also issuing a crypto token for convenience. In these cases, the token may not confer legal rights but prompts the issuer to update records.

For example, a company might issue a class of its stock natively on Ethereum. When Investor A sends 10 tokens to Investor B’s wallet, a smart contract could automatically notify the issuer’s transfer agent to record that change of ownership. In either case, the SEC and other regulators emphasize that all compliance requirements (registration, disclosure, etc.) still apply. Issuers cannot use tokenization as a loophole to avoid securities laws.

Third-party–sponsored tokenized securities

Third-party–sponsored tokens are created by entities other than the original issuer, making them one step removed from the official shares or bonds. These tokens may have different legal structures and may not carry the same rights as the underlying security. There are two types of third–party–sponsored tokenized securities:

Custodial tokenized securities

In this model, a regulated intermediary holds the actual shares or bonds in custody and issues blockchain tokens representing claims on those assets. The Distributed Ledger Technology (DLT) is integrated into a custodian’s recordkeeping system while the token is linked to a “security entitlement” held by the third party. So when Investor A sells a token to Investor B, the custodian updates its off-chain records to reflect that B now owns the entitlement to the stock. Economically, the token-holder has an indirect interest in the security through that entitlement. But because the actual shares stay in custody (often at the central securities depository), the token does not by itself confer official ownership rights in the issuer.

This model resembles mutual funds or deposit receipts, where the token wraps a claim on the underlying asset. It offers regulatory clarity since the security remains within the regulated custody system. However, holders assume the custodian’s risk and may lose value if the third party defaults or violates regulations.

Synthetic tokenized securities

The other third-party approach is to create a synthetic token whose value is linked to a security, but which is legally a new instrument issued by the third party. There are two examples:

• Linked securities: Here, a company (not the original issuer) issues its own tokenized stock or bond that pays off according to the performance of a reference security. For instance, Company X might issue “Token X” that rises and pays dividends as if it were tied to Company Y’s shares, but legally it is a different share (like a structured note or exchangeable share). The token’s smart contract might be programmed to mirror stock price moves or corporate actions of the underlying. But holders of Token X have no direct claim on Company Y; they only have claims on the issuer of Token X. This is essentially creating a new equity or debt instrument whose economics are linked to something else.
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• Security-based swaps (SBS): In this variant, a token represents a swap contract referenced to an underlying security. The third party (usually a financial institution) issues the token as a swap paying off based on a stock or bond’s value or events (e.g., price changes, defaults). Security-based swap tokens let investors get synthetic exposure to an asset. Again, the token-holder has no shareholder rights in the underlying company. The swap issuer bears the counterparty obligations. The SEC notes that tokenized security-based swaps are still securities themselves and would fall under swap rules.

Real-world examples of tokenized securities

Tokenization is transitioning from experimental stages to real-world applications through pilot programs and new products, such as:

• Tokenized funds: One of the largest segments is tokenized money-market and bond funds. BlackRock’s BUIDL fund (an Ethereum-based stablecoin fund of U.S. Treasury-backed assets) reached a roughly $1.75 billion market cap by late 2025. Other asset managers are launching on-chain funds or bond tokens to attract crypto investors.
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• Tokenized corporate bonds and government securities: Financial institutions and treasuries are experimenting with issuing bonds on blockchain. For example, the European Investment Bank issued digital bonds in euros and sterling via various blockchains, and corporations like Siemens issued €60M and €300M bonds on Ethereum and Swiss DLT networks, respectively. Thailand’s “G-Token” program (2023) tokenized retail government bonds for small investors.
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• Tokenized equities: Several stock tokens have launched recently. Robinhood, for instance, offered tokenized U.S. stocks and ETFs to its European clients starting in June 2025. In another case, Figure Technologies filed an S-1 in late 2025 to issue its own stock on the Provenance blockchain alongside its Nasdaq-listed shares.
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• Security token exchanges and marketplaces: Dedicated platforms for security tokens are appearing. For example, Securitize, Polymath, and Tokeny have launched platforms for issuers to list tokenized securities in regulated offerings. Traditional finance firms are also exploring tokenized securities. As mentioned earlier, NYSE’s parent company (ICE) announced in 2025 its plan to build a tokenized trading venue that would allow instant settlement and funding via stablecoins.
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• Custody and wallet solutions: Alongside tokens, new custody models are developing. Some platforms allow investors to hold tokenized shares in regulated wallets (with KYC/AML controls built in). Meanwhile, crypto-native custody (private wallets) is also used, especially for smaller investors. For example, Coinbase has pursued custody of tokenized assets under regulatory frameworks (though the US is still clarifying rules).

Risks and policy issues

Tokenized securities involve all the business and compliance considerations of traditional securities, along with new blockchain-specific challenges. The SEC has clarified that tokenized offerings and trading must comply with existing securities laws, while policymakers are considering new legislation to provide further guidance.

• Regulatory compliance and uncertainty: Since tokenized assets are “securities” by definition, they must follow all existing rules on registration, reporting, custody, etc. Regulators may need to update guidance (as the SEC has begun doing), but no blanket exemptions exist. An improperly issued token could be an unregistered securities offering. Uncertainties around custody (digital wallets vs qualified custodians) are hot issues. Without clear regulations, some issuers face delays or legal risk.
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• Investor protection and counterparty risk: In third-party models, token-holders depend on the token issuer or custodian. If that party fails or misuses the underlying assets, token-holders may lose out. For example, holders of custodial tokens are effectively unsecured creditors of the custodian, not direct shareholders of the company. Likewise, synthetic token holders depend on a swap or contract issuer. The SEC specifically warns that third-party tokens can expose investors to bankruptcy or counterparty risk beyond what direct shareholders face.
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• Technology and operational risks: Smart contracts could have bugs that lock up or mismanage tokens. If a blockchain network has congestion or downtime, transfers might fail or be delayed. There is also the challenge of linking off-chain events with on-chain records reliably. For instance, ensuring that a token truly reflects an up-to-date share register requires careful integration. Issues like double-spending (selling a tokenized asset and the same asset elsewhere) or blockchain fork disputes can arise if on-chain and off-chain records diverge. Moreover, crypto platforms are targets for hacks or fraud.
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• Market fragmentation: Without interoperability standards, tokenized assets could fracture across different chains and markets. The same real-world security might trade as different tokens on multiple blockchains, leading to price discrepancies or illiquidity. Another potential problem is when multiple banks or platforms each issue their own tokenized version of the same deposit or bond. Those tokens might not easily be exchanged and could confuse the market and hinder liquidity.
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• Financial stability concerns: Tokenization could theoretically speed the flow of funds dramatically. For example, tokenized bank deposits (like stablecoin accounts) could allow instant withdrawals and transfers around the clock. While convenient, this might intensify “run” risks where investors rapidly move funds off-chain or among tokens in a panic. It could drain liquidity from banks or intermediaries much faster than traditional transfers. A severe market shock could propagate quickly through token networks.
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• Legal and jurisdictional issues: Blockchains are global, but securities laws are national. Cross-border trading of tokenized stocks raises tricky questions on which regulators have authority and how to enforce laws internationally. In many cases today, tokenized stocks offered to European investors (like Robinhood’s token listings) explicitly exclude U.S. buyers to avoid SEC jurisdiction.

ERC-3643 Real-World Asset (RWA) token standard

One development addressing compliance is the ERC-3643 token standard on Ethereum, which was specifically designed for regulated asset tokens. Unlike a plain ERC-20 token, an ERC-3643 token is permissioned and has built-in identity and compliance checks. Each participant must be verified before they can hold or transfer the token. For example, transfer functions can be coded to refuse trades unless both addresses are whitelisted by a KYC provider. In effect, the token itself carries enforcement of investor eligibility (such as accredited status) and transfer restrictions (such as lock-up periods).

ERC-3643 is agnostic and can tokenize real-world assets such as stocks, bonds, real estate shares, and other assets with intrinsic value. It also remains compatible with normal Ethereum tools, so tokens can still be held in standard wallets after passing identity checks.

The ERC-3643 framework consists of a suite of smart contracts for identity (ONCHAINID), token factory, and compliance modules. Tokeny Solutions (the firm behind T-REX) spearheaded the standard, and it was eventually accepted as an official Ethereum Improvement Proposal. Now managed by an industry association, ERC-3643 has gained adoption by issuers of digital securities. Its major selling points are that it fits into existing crypto ecosystems while satisfying regulators’ demands for control.

Trading platforms for tokenized securities

Tokenized securities trading remains a niche but growing part of market infrastructure. A number of specialized venues and platforms have emerged for trading tokenized securities and aim to bridge crypto and traditional finance for investors. They are:

tZERO (US) and Archax (UK)

tZERO (operated by Digital Asset Holdings) and Archax announced a partnership to share liquidity and cross-list tokenized assets. They aim to support institutional-grade trading of security tokens (both equities and funds) with oversight by regulators.

Templum (US)

Templum created a FINRA-registered platform (now part of Liquidity Marketplace) for token offerings and secondary trading. It provides infrastructure for issuers to conduct initial sales of tokenized securities and gives investors a transparent venue to trade them.

Blocktrade (Switzerland)

Blocktrade operates as a crypto exchange under Swiss regulation. It not only issued its own tokens but also opened markets for regulated tokens. This example shows an exchange using tokenization end-to-end. It used Tokeny (ERC-3643) to list its shares, making them tradable on Blocktrade’s platform.

Other crypto exchanges and FinTech platforms

Some major crypto exchanges have explored listing tokenized stocks. Major players like Securitize and Ondo have launched tokenized US stocks with millions in trading volume. In general, many centralized crypto exchanges are developing frameworks to handle these assets, especially those with fiat on-ramps.

Traditional exchanges exploring tokens

Aside from ICE/NYSE’s token project, others are watching closely. For instance, Singapore’s DBS Bank has experimented with issuing tokenized bonds, and the Singapore Exchange has done tokenized equity demos. In Europe, Cboeand other venues have signaled interest in integrating tokenized securities. These efforts suggest that in the future, one might trade tokenized shares on platforms analogous to stock exchanges or on hybrid venues open to both blockchain and legacy systems.

Market trends

At the time of writing, reports have indicated explosive growth in tokenized equities. One analysis found tokenized US stocks and funds near $1 billion by January 2026, up almost 30-fold year-over-year. The majority of this activity has so far centered on U.S. ETFs and high-liquidity stocks. Money-market and government-bond token funds have also swelled, reaching several billions by late 2025. These gains suggest that institutional investors are beginning to embrace blockchain access to fixed-income and equity markets. However, the market is still concentrated as a few firms (like Ondo Global and Securitize’s xStocks) account for most tokenized equity value. Nonetheless, the upward trajectory shows tokenization is moving beyond the pilot stage.

Traditional finance firms are piling in as the adoption of tokenized securities grows. As mentioned earlier, BlackRock tokenized a money-market fund on Ethereum, while JPMorgan’s Kinexys platform has done multiple bond issuances.

Regulatory signals are also warming up as the SEC granted DTCC a pilot program to test tokenized securities settlement, and legislators introduced stablecoin/crypto legislation (e.g., the GENIUS Act) to clarify infrastructure. The ICE/NYSE announcement mentioned above reflects this institutional momentum. All signs point to more native digital issuances in the next few years, not just wrappers around old assets.

Tokenized securities are at the intersection of finance digitization and blockchain decentralization. The current phase is focused on building infrastructure, launching initial token products, and updating regulatory frameworks. If this trend continues, entire asset classes may soon be routinely offered as tokenized products, transforming financial markets.