Asset Tokenisation: Structuring and Governance

Asset tokenisation is the process of representing a tangible or intangible asset digitally, as tokens on a blockchain or distributed ledger. The tokens, often called security tokens or asset-backed tokens, represent ownership of, or rights to, the underlying asset. Tokenisation can improve liquidity, access and efficiency, but it brings regulatory, security and market acceptance questions that must be addressed first.

Key takeaways

• Real estate, financial instruments, art, private equity, commodities and intellectual property can all be tokenised.
• The main benefits are liquidity, accessibility, efficiency, transparency and fractional ownership.
• Tokenised assets often fall within securities regulation, and AML and know your customer requirements apply.
• Regulatory complexity, security, interoperability and market acceptance remain the main challenges.

Which assets can be tokenised?

Real estate

Residential, commercial and industrial property can be tokenised, allowing fractional ownership and simpler transfer of property rights.

Financial instruments

Traditional financial assets such as shares, bonds and derivatives can be represented as tokens, enabling faster settlement and fewer intermediaries.

Art and collectibles

Tokenisation can make high-value artworks, collectibles and other tangible assets divisible and tradeable.

Private equity

Companies, start-ups and investment funds can tokenise shares or ownership stakes, making it easier to attract investors and support secondary trading. Where a Cayman fund tokenises its equity interests, CIMA still treats it as offering equity interests, as explained in our guide to setting up a Cayman crypto and blockchain fund.

Commodities

Physical commodities such as gold, oil or agricultural products can be tokenised, allowing investors to hold fractional interests.

Intellectual property

Tokenising patents, copyrights or other intellectual property rights can help creators monetise their work more efficiently.

Benefits of asset tokenisation

Liquidity

Tokenisation can improve liquidity in traditionally illiquid assets by allowing fractional ownership and secondary trading.

Accessibility

It can widen the range of investors able to participate in assets they may not previously have been able to access, subject to the investor eligibility rules that apply to each offering.

Efficiency

Tokenisation can simplify administrative processes, reduce paperwork and automate parts of the compliance process, which can save cost and speed up transactions.

Transparency

Transactions and ownership records on a blockchain are visible and difficult to alter, which supports trust and helps reduce fraud.

Fractional ownership

Dividing a high-value asset into smaller, more affordable units can increase market participation.

Regulatory considerations for tokenised assets

• Asset tokenisation often falls within securities regulation in many jurisdictions, requiring compliance with securities laws and the relevant regulators.
• Compliance with anti-money laundering and know your customer requirements is essential to establish the legitimacy of tokenised assets and their holders. Our overview of Cayman AML obligations for relevant financial business explains how these apply to Cayman entities.
• The legal and regulatory landscape for tokenisation is evolving and varies by country, so participants need to stay informed and manage compliance accordingly.

In the Cayman Islands, a tokenisation project should also establish early whether its activity falls within the virtual asset regime. Our guide to Cayman VASP registration and licensing requirements sets out the categories.

Challenges of asset tokenisation

Regulatory complexity

The regulatory landscape varies by jurisdiction and by asset type, which makes it challenging to navigate.

Security

Keeping digital assets secure and protecting them from hacks or theft is a significant concern.

Interoperability

Different blockchains and token standards can limit interoperability and liquidity across platforms.

Market acceptance

The adoption of asset tokenisation is still at an early stage, and wider market acceptance may take time.

The outlook for tokenisation

Asset tokenisation has the potential to change how assets are owned and traded, making traditionally illiquid assets accessible to a wider audience. Its success depends on addressing the regulatory challenges, ensuring security and building trust across the financial system. As blockchain technology matures, tokenisation is likely to become a more established feature of financial markets.

How Bell Rock supports tokenisation projects

Bell Rock is a CIMA-licensed company manager based in the Cayman Islands. For tokenisation and Web3 projects it coordinates entity formation, including the Cayman foundation and DAO structures often used as the issuing or governance vehicle, registered office and corporate services, governance support and VASP registration support. Independent directors are available through named individuals who act in their personal capacity. Bell Rock does not act as custodian or investment adviser to a project.

Frequently asked questions

What is asset tokenisation?

It is the representation of a tangible or intangible asset as tokens on a blockchain or distributed ledger, where each token represents ownership of, or rights to, the underlying asset.

Are tokenised assets regulated?

Often, yes. Tokenised assets frequently fall within securities regulation, and AML and know your customer requirements apply. The position varies by jurisdiction and asset type.

What are the risks of tokenisation?

The main challenges are regulatory complexity, the security of digital assets, interoperability between blockchains and token standards, and the pace of market acceptance.

Related reading

• Cayman foundation companies for DAOs
• Decentralised protocols: legal and governance questions
• Governance priorities for crypto fund boards
• Tokenised Fund Structures in the Cayman Islands

Bell Rock supports token issuers and Web3 projects through its Cayman DAO and foundation services.