As global markets experiment with putting assets such as stocks, gold and real estate onto blockchains, Mint explains what asset tokenization is, how it works, and why regulators are beginning to pay closer attention to this emerging financial model.
What is tokenization of assets?
Tokenization refers to the process of representing real-world assets in digital form on a blockchain. Simply put, it converts rights linked to a physical or financial asset into a blockchain-based token that can be stored, transferred or traded digitally. These tokens serve as on-chain records of the underlying asset and can be managed through digital wallets, much like cryptocurrencies.
Depending on the use case, tokenization can create fungible tokens, which are interchangeable, or non-fungible tokens (NFTs), which represent unique assets. In theory, a wide range of assets can be tokenized, including stocks, real estate, commodities, art, intellectual property rights, infrastructure and even natural resources.
The “real-world” label is the key distinction from cryptocurrencies such as Bitcoin, which are purely digital. Tokenized assets differ fundamentally because they are backed by real-world assets and then brought onto blockchains.
Tokenization typically follows two models. One grants direct ownership or rights over the underlying asset. The other mirrors its price or performance without transferring ownership, similar to how exchange-traded funds (ETFs) track assets when direct ownership is complex or restricted.
What did Chadha propose in Parliament?
Speaking in the Rajya Sabha last week, Aam Aadmi Party (AAP) leader Raghav Chadha called for the introduction of an asset tokenization law. Drawing a parallel with UPI, he said that just as it revolutionized digital payments in India, asset tokenization has the potential to democratise investment and asset ownership.
He argued that middle-class investors today have limited options such as mutual funds and bank deposits, while access to commercial real estate, infrastructure projects and private asset classes remains largely out of reach.
Asset tokenization, he said, would allow real-world assets such as real estate projects, infrastructure assets, commodities and even intellectual property rights to be converted into digital tokens tradable on blockchains. This would ensure that high-value assets are no longer the exclusive preserve of the wealthy, allowing ordinary investors to benefit from their appreciation.
Calling asset tokenization “one of the most transformative technological innovations of the twenty-first century”, Chadha said it could help the middle class earn higher returns, secure retirement savings and improve liquidity in traditionally illiquid assets.
What are some examples of tokenized assets?
While tokenization is still at an early stage, some prominent use cases have emerged. The St. Regis Aspen Resort, a luxury hotel in Aspen, Colorado, was among the first major US real estate assets to be tokenized through the ‘Aspen Coin’. Crypto platform CaskCoin uses Ethereum-based tokens to represent legally enforceable ownership in maturing casks of Titanic Distillers whiskey.
Among more traditional assets, OpenEden Labs has brought US Treasury bills onto the blockchain by issuing TBILL tokens, whose value and accrued yield reflect its underlying portfolio of government securities. Gold has also been tokenized through products such as PAX Gold (PAXG), where each token corresponds to physical bullion held in regulated custody by Paxos and stored in LBMA-approved vaults. Stablecoins—cryptocurrencies backed by traditional assets such as the US dollar—are another form of tokenized security.
In September, Nasdaq, the world’s second-largest stock exchange, submitted an application to the US securities regulator seeking permission to allow tokenized stocks to trade under the same rules as traditional equities.
Platforms such as Robinhood, Gemini, and Kraken have launched tokenized stocks in Europe, while Coinbase and Robinhood are seeking approval to offer similar products in the US. In a major step for the segment, the US Securities and Exchange Commission (SEC) earlier this month allowed the Depository Trust & Clearing Corp. (DTCC)—the central clearing and settlement body for US equities—to provide certain securities tokenization services to market participants.
What are the pros and cons of this asset class?
One of the biggest advantages of asset tokenization is that it enables fractional ownership of high-value, illiquid assets such as real estate or collectibles. This lowers the entry barrier for investors and broadens access to asset classes traditionally reserved for wealthy individuals or institutions—imagine owning 1% of a heritage building, a Van Gogh painting or a rare watch collection.
By making it easier to buy and sell asset fractions, tokenization can also improve liquidity. Blockchain-based records may enhance transparency by giving participants access to a shared source of data. Fewer intermediaries and automated smart contracts can reduce transaction costs and speed up settlements. For investors, tokenised assets also offer diversification beyond traditional stocks and bonds.
However, the risks are significant at this stage. Many tokenized products—particularly stocks—resemble derivatives rather than true ownership, often lacking voting rights, dividends or robust disclosures. Earlier this year, for instance, Robinhood offered tokenized shares of high-profile private companies such as OpenAI and SpaceX to European investors. OpenAI later clarified that it does not recognize these tokens and that they should not be construed as equity in the company.
Regulatory uncertainty remains high, with investor protections varying widely across jurisdictions. Legal recognition of digital ownership can be unclear, creating enforcement risks. Critics also argue that vehicles such as REITs and InvITs already offer exposure to real estate and infrastructure, and that tokenization adds limited incremental value.
Valuation is another challenge, particularly for unique assets, and prices may be volatile in secondary markets. Additional risks include tax complexity, counterparty exposure and cybersecurity threats.
What is the global regulatory position on these assets?
Regulation is evolving alongside the broader crypto ecosystem. In the US, the SEC has consistently stressed that tokenised securities do not escape existing securities laws simply because they are issued on a blockchain.
In a July statement, SEC commissioner Hester Peirce said that while blockchain technology can facilitate issuance and trading, “tokenized securities are still securities,” and market participants must comply with federal rules on disclosure, registration and trading, regardless of format. The SEC’s recent approval for the DTCC has fuelled expectations of faster integration of tokenised securities into the traditional market infrastructure.
In the European Union, tokenized assets fall under the Markets in Crypto-Assets (MiCA) regulation. The European Central Bank has also launched a pilot programme to promote tokenization. Markets such as Singapore and Dubai, among others, have similarly established regulatory frameworks to oversee asset tokenization.
