Tokenization of Assets: What Lies Behind the Term

Why tokenization is becoming a topic for owners too

The term now appears in bank meetings, trade journals, and offers for investors. Sometimes it is about a bond that a corporation issues on a blockchain, sometimes about shares in a property from a few hundred euros, sometimes about whether a mid-sized business could raise money this way too. For owners it is worth separating the substance from the label.

This article therefore asks: What does tokenization of assets mean, what does it achieve today, and where does the promise end? To answer it, we first clarify the term, then present the three-layer model as the thinking model, look at the legal framework and examples, weigh two readings, and finally derive a test for offers you come across.

What tokenization means

The Bank for International Settlements (BIS) describes tokenization as the process of generating and recording a digital representation of traditional assets on a programmable platform. A token is an entry in a distributed register, such as a blockchain, that contains information and at the same time programs that determine how it is issued, transferred, and redeemed (cited in Proskurovska and Birch 2026).

The distinction from crypto assets such as Bitcoin is important. Bitcoin exists only digitally; there is nothing outside the blockchain that it represents. A tokenized asset, by contrast, refers to something outside: a bond, a fund unit, a property, a receivable. Misztal (2026) names financial instruments, collateral, and real estate as examples, but also patents and copyrights. How Bitcoin came about is described in Bitcoin in fifteen years.

Three properties are usually attributed to tokenization. It allows fractionalization, splitting a large value into small units. It promises faster settlement, because security and money can be exchanged in the same system. And it makes rules programmable, for example automatic interest payments. McCalman (2026) describes how delivery and payment can then take place in a single step, provided the money also exists as a token.

The thinking model: three layers behind every token

To understand what a token is worth, a simple model helps that I call the three-layer model. Every tokenized asset consists of three layers, and each one can fail.

The technology mainly concerns the third layer. The first two remain as analog as before: whether a property exists and who owns it is recorded in the land register, not on the blockchain. Proskurovska and Birch (2026) therefore describe tokenization as a continuation of securitization, the conversion of assets into tradable securities, using new technical means.

An everyday analogy: a cloakroom ticket is a token. It is useful, quickly handed over, and not easy to forge. But it is only worth as much as the coat in the cloakroom and the reliability of whoever hands it out. A digital ticket changes nothing about that.

A token makes a claim mobile, not better. Anyone who checks the token has to check the claim.

What is already possible in Germany and the EU

In 2021, Germany allowed securities to be issued without a paper certificate with the Electronic Securities Act (eWpG). They are entered in an electronic register that can be kept centrally or as a crypto securities register on a distributed technology such as a blockchain. The Future Financing Act extended the framework to shares at the end of 2023. At EU level, the DLT Pilot Regime has applied since March 2023, under which trading and settlement systems based on distributed ledgers are tested under supervision.

One distinction is important: tokenized securities do not fall under the crypto regulation MiCA but under securities law. MiCA regulates crypto assets that are not financial instruments, such as stablecoins, as Stablecoins and MiCA describes. Anyone offering a tokenized unit is therefore generally subject to the same obligations as for a conventional security, for example regarding the prospectus and supervision.

1. 2021: Electronic Securities Act

   Electronic bearer bonds and crypto securities registers become possible in Germany.

2. 2021: digital bond of the European Investment Bank

   The EIB issues a digital bond on a blockchain, an early example of a large issuer (Mirdala 2025).

3. February 2023: Siemens digital bond

   Under the eWpG, Siemens issues a one-year bond of 60 million euros on a public blockchain. Payment is made through conventional channels because there is no digital central bank money.

4. March 2023: EU DLT Pilot Regime

   Trading and settlement systems on distributed ledgers can be tested under supervision.

5. End of 2023: Future Financing Act

   The framework for electronic securities is extended to shares.

The Siemens example shows both sides of the technology. According to reports, the issue was settled in about two days, without the usual syndicate of banks. At the same time, according to an analysis by M&G Investments, the terms provided that Siemens could transfer the bond to another register, replace it with a conventional bond, or call it if the digital register did not work. The legal system therefore remains the foundation; the blockchain is a tool built on it.

Two readings: democratizing financial markets or new packaging?

Mirdala (2025) describes the first reading. Using tokenized bonds as an example, he shows how distributed ledgers and programmable contracts can simplify processes, shorten settlement times, and make intermediaries dispensable, citing the EIB's digital bonds and the asset manager BlackRock's first tokenized fund on the Ethereum blockchain as cases.

Proskurovska and Birch (2026) argue against this. Tokenization is marketed as a democratization of financial markets but has to adapt to the existing infrastructure of exchanges, custodians, and supervision in order to work at all, and precisely this undermines the promise. With tokenized real estate, for example, small investors gain easier access but usually hold units in individual properties rather than a broadly diversified portfolio. The authors also point to the strong growth of private capital markets, around 24.4 trillion US dollars worldwide in 2023 according to an EY estimate they cite, for which tokenization is meant to open up new buyers.

For a business, I consider the second reading the more useful basic attitude, without disputing the first. The settlement advantages are real, as the Siemens example shows. But they concern the third layer. Anyone who buys or issues a token still bears the risk of the first two.

What this means for a mid-sized business

For most businesses, tokenization will first become relevant in two ways: as an investment offer and as a possible form of financing. The same calculation applies to both. A digital bond requires about as much preparatory work as a conventional one: prospectus or information sheet, credit documentation, register, paying agent. Whether this is worthwhile for a mid-sized company depends less on the technology than on volume and the group of investors. Which routes exist on the capital market is described in Capital markets for mid-sized companies.

That blockchain applications beyond financial markets often deliver less than announced was shown in Blockchain in the supply chain. The lesson applies here too: the benefit lies where a register has to be shared by several parties and all of them need a common state.

The three-layer test for offers

From the thinking model I derive a test that I apply to every offer labeled tokenization, whether it concerns investment or financing.

• Asset: What exactly is behind the token, who values it, and how can I check that independently?
• Claim: Against whom is my right directed, the issuer itself or an intermediary company? What applies in insolvency?
• Register: Who keeps the register, is it registered or supervised under the eWpG, and what happens if it fails?
• Supervision: Is there an approved prospectus or information sheet, and is the provider listed in BaFin's company database?
• Exit: Where and at what cost can I sell the token? A token is only liquid if there are buyers.

How to check partners and providers in general is described in Due diligence on business partners. How crypto assets are held securely in a company is covered in Holding crypto assets in a company.

What holds in general and where it stops

Tokenization is less a revolution than a new technique for old tasks: recording, transferring, and settling claims. Its greatest benefit is likely to lie where many parties need a common register and settlement is expensive and slow today. Its greatest risk lies where the label distracts from the first two layers.

The limits of this assessment are clear. The studies cited argue mainly conceptually and with case examples; robust measurements of cost advantages hardly exist. The legal framework continues to evolve, and market volumes change quickly. Specific figures on the market for tokenized assets were therefore deliberately not reproduced.

Conclusion: the token is the tool, the claim is the substance

To the guiding question: tokenization means representing assets digitally on a programmable platform. It can bring fractionalization, faster settlement, and automated processes, and in Germany it is legally possible under the eWpG, as the Siemens digital bond shows. But the three-layer model shows where the promise ends: the technology improves the register, not the asset and not the claim.

For a business this means: examine every offer as if the token did not exist. If it passes that test, the digital form can be an advantage. This article is not investment advice.