Term

Tokenisation: Definition and Asset Types

Definition

Tokenisation is the process of creating a digital representation of an asset — or of rights in an asset — on a distributed ledger. The digital representation is the token; the underlying asset may be a financial instrument (a bond, a share, a fund unit), a physical asset (real estate, a commodity, a work of art), a claim (an invoice, a receivable), or an access right (a software licence, membership in an organisation).

A token is a data record on a distributed ledger that encodes: the identity of the asset it represents; the identity of its current holder; the rules governing its transfer, division, and exercise; and any other rights or obligations attached to it. These rules are typically implemented through smart contracts — self-executing code on the blockchain that automatically enforces the terms attached to the token.

The significance of tokenisation lies in what it changes about how assets can be held, transferred, and used:

Transfer of a tokenised asset is effected by a blockchain transaction, without requiring a central registrar, a transfer agent, or a physical delivery
Settlement of a tokenised asset transfer can be atomic — simultaneous delivery and payment — eliminating the counterparty risk inherent in traditional settlement delays
Divisibility of tokenised assets can be configured precisely — a real estate interest that previously required a minimum investment of CHF 500,000 can be tokenised into units of CHF 1,000, with fractional ownership encoded directly in the token structure
Programmability allows tokens to carry automatic execution logic — a tokenised bond can automatically pay coupons on specified dates, enforce transfer restrictions for regulatory compliance, or trigger redemption at maturity without manual intervention

Types of Tokenised Assets

Tokenised Securities

Financial securities are the most developed asset class for institutional tokenisation. The category encompasses:

Tokenised bonds — debt instruments issued in digital form on a distributed ledger. The bondholder’s claim is recorded on the blockchain; coupon payments are made to the registered holder address; redemption at maturity is automated. Switzerland’s DLT securities market, anchored by SIX Digital Exchange, is the world’s most legally developed tokenised bond market.

Tokenised equity — shares in companies represented as tokens on a blockchain. Private company shares are a particularly attractive candidate for tokenisation because they lack the exchange infrastructure that makes listed shares easily tradable; tokenisation can create secondary market access for illiquid private equity holdings.

Tokenised fund units — units in collective investment schemes (mutual funds, ETFs, hedge funds, private equity funds) represented as blockchain tokens. BlackRock’s BUIDL and Franklin Templeton’s BENJI are the highest-profile examples of tokenised money market funds, both operational on public blockchain infrastructure.

Tokenised structured products — certificates, warrants, and other structured instruments issued in digital form. SIX Digital Exchange has hosted tokenised structured product issuances from Swiss private banks.

Tokenised Real Assets

Real estate — property ownership interests represented as tokens. Real estate tokenisation typically involves creating a special purpose vehicle (SPV) that holds the property, with SPV shares or debt instruments tokenised rather than the property title itself — because most jurisdictions’ land registry systems record title in paper or electronic registers that are not blockchain-native. Direct blockchain property title registration requires cantonal or state-level legislative action that has not yet been achieved in Switzerland or most other jurisdictions.

Commodities — physical commodities (gold, oil, agricultural products) represented as tokens. Commodity tokens can represent either allocated physical possession (the holder owns specific physical units) or unallocated exposure (the holder has a claim against a pool). Several Swiss precious metals dealers have issued tokenised gold instruments backed by allocated physical gold held in Swiss vaults.

Art and collectibles — high-value physical objects represented as tokens. The use case is primarily fractional ownership of objects that are too expensive for individual investors to purchase outright, and provenance tracking across the secondary market.

Luxury goods — Swiss watchmakers and other luxury goods manufacturers have explored tokenised digital product passports that travel with the physical object through the secondary market, certifying authenticity and ownership history.

Tokenised Fund and Infrastructure Interests

Infrastructure project financing — tokenised debt or equity instruments financing infrastructure projects (renewable energy, transportation, utilities). The long-term, illiquid nature of infrastructure investments makes tokenisation attractive as a mechanism for enabling secondary market liquidity.

Trade receivables — invoices and receivables represented as tokens and sold to investors in a tokenised trade finance market. Geneva-based Komgo and related platforms explore this use case in the commodity trading sector.

Fungible vs Non-Fungible Tokens

A fundamental distinction in tokenisation is between fungible and non-fungible tokens:

Fungible tokens (FTs) are interchangeable. Each unit of a fungible token is identical to every other unit and can be freely substituted for it. A tokenised bond is fungible: one unit of a CHF 1,000 bond token is identical and interchangeable with any other unit of the same bond issue. The ERC-20 standard on Ethereum is the dominant technical standard for fungible tokens. Most financial securities — bonds, fund units, commodity tokens — are implemented as fungible tokens.

Non-fungible tokens (NFTs) are unique. Each NFT is a distinct digital asset, with a unique identifier that distinguishes it from all other tokens. NFTs are used for assets that are inherently unique: artworks, specific luxury goods (an individual watch with a specific serial number), real estate parcels (each is distinct in location and characteristics), and digital collectibles. The ERC-721 standard on Ethereum is the dominant standard for non-fungible tokens.

The distinction matters for DLT securities: most DLT securities under the Swiss DLT Act will be fungible tokens — units of bonds or structured products where each unit carries identical rights. However, a DLT security representing a single unique claim (such as a privately placed note issued to a single investor) may be structured as a non-fungible instrument.

The Swiss DLT Act’s DLT Securities Category

Switzerland’s Federal DLT Act created a specific legal category for tokenised financial instruments: the Registerwertrecht (DLT security, literally “register value right”). A Registerwertrecht is defined in the Swiss Code of Obligations as a right that is incorporated in a distributed electronic register in such a way that the registered holder can exercise it independently — without requiring the cooperation of any intermediary or the register operator.

This definition is precise and legally significant. Not every blockchain token is a Registerwertrecht. A Registerwertrecht must:

Be incorporated in a distributed electronic register — not a centralised database
Be incorporated such that the registered holder can exercise the right independently — the blockchain record must be sufficient to establish and enforce the holder’s rights
Satisfy the technical requirements of the Code of Obligations: the register must be tamper-resistant, provide participant access, and enable independent exercise of rights

The Registerwertrecht is distinct from a mere blockchain record of an off-chain right. It is not a tokenised representation of a traditionally issued security stored in a CSD; it is a security that exists only on the blockchain. The transfer of a Registerwertrecht is the on-chain transaction — not a transaction that references or reflects a separate off-chain transfer. This distinction makes the Swiss Registerwertrecht the world’s most legally complete form of tokenised security: the token is the security, not a representation of it.

The Swiss DLT Act does not limit Registerwertrechte to any specific asset class. Bonds, equity, fund units, structured products, and other rights can all be structured as Registerwertrechte, provided they meet the Code of Obligations’ technical requirements for the underlying register.

This encyclopedia entry is published by ZUG DLT, an editorial publication of The Vanderbilt Portfolio AG, Zurich. Encyclopedia entries are for informational purposes only. See our full Disclaimer.