Overview
Recent policy proposals and discussion around tokenization address several core questions. Among those, are six connected questions: how tokenised instruments should be characterised within the regulatory perimeter; when on-chain records create, evidence or transfer legal rights; who remains accountable when regulated functions are automated, compressed or redistributed across tokenised arrangements; how infrastructure, interoperability and standards can support scale without creating fragmented markets; how access, identity, investor eligibility and financial-integrity controls should operate across wallets, ledgers and intermediaries; and what form of money should be used to settle tokenised transactions while preserving finality, par value and the singleness of money.
Across these areas, the common policy direction is that tokenisation is generally treated as a change in representation, recordkeeping or market infrastructure rather than an automatic change in the underlying legal or economic nature of the asset. The focus is therefore on how existing financial-market, funds, prudential, custody, settlement, conduct and financial-crime frameworks apply when assets, money and records are represented on programmable ledgers, and where targeted legal clarification, supervisory expectations or rule adjustments may be needed to preserve legal certainty, identifiable accountability, resilient infrastructure, effective investor protection and comparable regulatory outcomes.
What's new
The South Korea Financial Services Commission is consulting on implementing rules for the tokenized securities framework due to take effect on Feb. 4, 2027. The proposals set eligible securities, distributed ledger conditions and a KRW 4 billion capital requirement for issuer account managers. They also establish an over-the-counter license category for debt securities and cap each retail investor’s annual net purchases at KRW 100 million per venue.
Ukraine's National Securities and Stock Market Commission and the International Finance Corporation have agreed to develop regulatory frameworks for tokenized assets, securitization and other digital capital market instruments through 2029. The work will include regulatory gap analysis, drafting support, practical market guidance and staff training, with investor protection incorporated into the new approaches.
The Commodity Futures Trading Commission updated its crypto FAQs to address tokenized forms of permitted customer-fund investments and the use of blockchain technology for registrant recordkeeping.
Deep dive
What is being regulated: the underlying asset, the token, the legal claim represented by the token, or the activity performed around it?
Policy approaches commonly treat tokenisation as a change in representation, recordkeeping or market infrastructure rather than as an automatic change in the legal or economic nature of the asset. The central classification question is what claim or exposure the token confers and which regulated activities are performed around it. This requires distinguishing technically similar tokens that have materially different legal effects, such as issuer-issued securities, third-party custodial entitlements, synthetic exposure tokens, digital twins, native tokens, tokenised fund units and fractionalised RWA structures.
Classification analysis therefore turns on the legal and economic content of the token, rather than the ledger technology used to record it. Observed approaches distinguish whether the token is the regulated instrument itself, a representation of an off-chain asset, a native on-chain issuance, a claim against an issuer or custodian, or a synthetic exposure. Some proposals address overlap across investment-business, fund, fund-administration, custody and digital-asset regimes through harmonised definitions and targeted exemptions, while keeping tokenisation-specific risks within scope. The same classification issue appears in fractionalised RWAs and revenue-sharing claims over asset pools, where the relevant question is whether the arrangement is closer to direct ownership, an investment, a fund interest or a collective-investment-type structure.
When does an on-chain event create, evidence, transfer or extinguish legal rights, and when is that transfer final and enforceable?
A recurring position is that scalable tokenisation depends on legal certainty over the authoritative record of ownership, the legal effect of token transfer and the point at which settlement becomes final. Tokenisation may automate transfer and settlement, but it does not remove the need to determine whether the on-chain record is legally operative, merely evidential, or an instruction to update an off-chain register. Smart-contract enforceability, liability for code errors, recourse, governing law and cross-border recognition remain core legal questions.
The practical considerations focus on identifying the legally authoritative record, whether that is an on-chain register, off-chain register, hybrid record, CSD / DSD record, or fund register maintained using DLT. Examples distinguish models where on-chain transfer updates the issuer’s master ownership record from models where token transfer only notifies an off-chain recordkeeper; fund-tokenisation guidance also recognises that an on-chain record may serve as primary books and records where resilience requirements are met. Settlement finality is treated both as a legal question and, for regulated settlement systems, as a need for a deterministic and auditable point of transaction commitment. Legal assessments commonly cover enforceability of tokenholder rights, smart contracts, cross-border recognition, correction powers, court orders, insolvency procedures and dispute-resolution mechanisms.
Who is accountable for each regulated or economically critical function when tokenisation automates, compresses or redistributes traditional roles?
Authorities generally do not treat decentralisation, smart contracts or public networks as removing responsibility for regulated activity. The recurring policy question is how accountability is allocated across issuers, tokenisers, secondary intermediaries, custodians, administrators, transfer agents, settlement operators and technology providers. Tokenisation also creates role convergence, where one entity may issue, distribute, custody, operate a venue, maintain the register and control smart-contract functionality.
Accountability is commonly mapped by function across the tokenisation lifecycle, including token creation, asset verification, custody, disclosures, trading access, lifecycle events and client protection. One observed model uses operational categories such as primary tokeniser, secondary offeror and custodian, while another frames the issue more generally as the need for an identifiable person to stand behind each regulated activity. The accountability question also extends to ecosystem enablers that may not fit traditional categories, including DLT infrastructure providers, smart-contract developers, oracles, analytics providers, digital identity providers, bridge operators and key-management providers. Governance issues are more acute for permissionless systems because protocol upgrades, forks, rule enforcement, validator behaviour and dispute resolution may lack the clear locus of responsibility found in permissioned or consortium systems.
How can tokenised systems scale without creating fragmented ledgers, closed ecosystems or inconsistent technical standards?
Observed approaches are generally technology-neutral, but they are not indifferent to architecture. The policy concern is that fragmented DLT networks could recreate closed-loop systems and liquidity silos, undermining the efficiency gains tokenisation is intended to deliver. Interoperability, common data standards, digital identifiers, token standards, messaging protocols and connectivity with legacy financial-market infrastructure are therefore treated as enabling conditions for scaled adoption.
The infrastructure considerations concern both network choice and the location of compliance controls within the technology stack. Some proposals permit use across different blockchain environments, including permissionless networks, provided compliance controls remain effective; where bridges, wrappers or cross-chain messaging weaken transfer restrictions or investor-eligibility controls, the focus shifts to equivalent gateway, smart-contract or off-chain controls. Common standards are discussed for data structures, transaction formats, identity verification, token identifiers, messaging, settlement rules and cross-chain communication. Interoperability with CSDs, payment systems, RTGS systems, custodians, brokers, fund administrators and transfer agents is treated as a practical condition for avoiding fragmentation between tokenised and non-tokenised versions of the same asset.
Who should be able to access tokenised financial services, and how should identity, eligibility and financial-crime controls operate across wallets, ledgers and intermediaries?
Access is treated as a design question about who can lawfully use a tokenised service and how eligibility is enforced before, during and after transfer. Authorities commonly emphasise authorised users, customer due diligence, AML/CFT, sanctions screening, investor eligibility and the ability to link on-chain activity to off-chain legal persons where required. On-chain traceability may support monitoring, but it is not treated as a substitute for identity verification and access controls.
The considerations focus on preventing tokenised services from being accessible to unintended, ineligible or illicit actors. Examples include authorised or KYC-ed users, permitted-list blockchain addresses, wallet controls, credential mechanisms and token standards that enforce investor qualifications, AML / sanctions restrictions and jurisdictional limits. Some approaches also discuss programmable freezing or clawback, remote attestation and zero-knowledge proofs as possible ways to support compliance outcomes, while noting that their limitations remain relevant. Where access extends beyond institutional users, the policy discussion also covers onboarding, user readiness, wallet usability, privacy, data protection and ways for investors to interact with tokenised services without necessarily managing the underlying technology directly.
What form of money should settle tokenised transactions, and how should settlement preserve finality, par value and the singleness of money?
Tokenised settlement requires coordination between the asset leg and the money leg. Full DvP or PvP on-chain generally depends on a compatible settlement asset, whether central bank money, tokenised deposits, stablecoins, wholesale CBDC, commercial bank money connected through APIs, or hybrid arrangements. Central bank money is often treated as the safest settlement anchor for wholesale markets, while tokenised deposits and stablecoins raise distinct questions about bank liability, reserve backing, redemption, par value, monetary fragmentation, financial integrity and cross-border use.
The central design question is whether the payment leg settles in central bank money, tokenised deposits, stablecoins, wholesale CBDC, commercial bank money through API synchronisation, or a hybrid arrangement. Central bank money is commonly described as anchoring finality, monetary stability and singleness of money in wholesale markets, while RTGS synchronisation and Eurosystem DLT settlement initiatives illustrate attempts to connect tokenised asset ledgers with central bank money. Tokenised deposits are analysed as bank liabilities that may preserve the two-tier monetary system, whereas stablecoins are treated as private settlement assets whose design can raise redemption, reserve-quality, issuer-credit, AML/CFT, consumer-protection and monetary-sovereignty questions. Atomic settlement is also described as involving trade-offs, including potential reductions in settlement and pre-funding risk alongside possible loss of netting efficiencies and changes to intraday liquidity needs.