What is tokenization?

Tokenization is the process of representing an asset as a token on a blockchain. The asset can be a share in a company, a slice of a money market fund, a government bond, a building or a bar of gold. The token acts as the record of who owns it, and it can be transferred the way a cryptocurrency is.

How does tokenization work?

An issuer creates tokens with a smart contract and links them, through legal documents, to an underlying asset. When a token moves from one wallet to another, ownership of the unit moves with it.

Most tokenized assets are not open to everyone. The contract usually holds a list of approved addresses, so only investors who have passed identity checks can hold or receive the token.

A dollar stablecoin is the simplest and most widespread example: a token that stands for a dollar held in reserve. Tokenized funds that hold US Treasury bills are the next step. The asset manager BlackRock launched one on Ethereum in March 2024.

What does the holder actually own?

The answer varies.

• The security itself. The issuer treats the blockchain as its official ownership register. The token holder is the shareholder or fund investor, with the same rights as any other.
• A claim on a security held by someone else. A custodian holds the real share, and the token is a promise linked to it. The holder depends on that intermediary staying solvent and honest.
• Price exposure only. Some products sold abroad as "tokenized stocks" are contracts that track a share price. The holder gets no vote and no direct claim on the company.

The label on the product does not settle which of these applies. The terms do.

Why are banks and asset managers interested?

Traditional securities trades take a day or more to settle and pass through several intermediaries. A token transfer can settle in minutes, at any hour, with payment and delivery happening in a single step. Tokens can be split into small fractions and used as collateral in automated lending.

Skeptics point out that existing markets already work well for most investors, that many tokenized assets trade thinly, and that a blockchain record is only as good as the legal promise behind it. The broader debate is covered in the guide to what blockchain is used for.

How is it regulated?

In the United States, putting a security on a blockchain does not change what it is. A joint SEC and CFTC interpretation in March 2026 said tokenized securities remain securities whatever their format or label.

On September 17, 2026, the SEC issued two conditional exemptions, lasting five years, that let approved venues trade tokenized versions of US-listed stocks through automated pools. The tokens must carry the same rights as the ordinary shares. Rules elsewhere differ and are still developing.