Securities Tokenization: Equity, Bond, and Fund Compliance

Market Context

Securities tokenization—the issuance and transfer of equity, debt, and fund interests via distributed ledger technology—has emerged as the institutional segment of the broader tokenized asset market. Unlike retail-oriented real estate tokens or cryptocurrency trading, securities tokenization has been driven by the largest names in global finance: BlackRock, Franklin Templeton, the European Investment Bank, Societe Generale, HSBC, and Goldman Sachs have all executed material tokenized securities transactions since 2021.

The market metrics reflect this institutional momentum. Tokenized bonds have surpassed $10.2 billion in cumulative issuance as of early 2026, spanning supranational issuers (World Bank, EIB), sovereign-adjacent institutions, and large commercial banks. Tokenized funds have reached approximately $2.5 billion in AUM globally, with BlackRock’s BUIDL fund alone accounting for $1.7 billion. The broader RWA tokenization market, at $18.9 billion, is anchored by these securities-sector figures.

The regulatory frameworks governing securities tokenization are the most developed in the tokenized asset space, precisely because traditional securities law—developed over decades—provides a comprehensive starting point. The compliance challenge is not regulatory ambiguity (as in DeFi or carbon credit tokenization) but rather the practical mapping of existing securities law onto DLT-based infrastructure that was not designed with those requirements in mind.

Equity Tokenization

Regulatory Classification

Tokenized equity—fractional ownership interests in a company, represented as tokens on a blockchain—is a security in every major jurisdiction. In the US, tokenized shares are equity securities subject to the full Securities Act and Exchange Act framework. In the EU, they are transferable securities under MiFID II, explicitly excluded from MiCA’s scope. In Singapore, they are securities under the Securities and Futures Act. In Switzerland, they are ledger-based securities (Registerwertrechte) under the revised Swiss Code of Obligations (in force since February 2021).

The compliance architecture for equity tokenization depends primarily on whether the offering is a public offering (requiring full registration or a prospectus) or a private placement (relying on an exemption). Most current equity tokenization is private placement—offered to institutional and sophisticated investors under Reg D in the US, to qualified investors under the EU Prospectus Regulation exemptions, or under equivalent private placement rules in Singapore and Switzerland.

Secondary Market Infrastructure

Equity tokens require licensed secondary market infrastructure. In the US, this means either a registered ATS (operated by a registered broker-dealer) or reliance on exemptions limiting transfer to qualified investors. In the EU, a DLT MTF or traditional MTF under MiFID II is required for organized secondary market trading. Switzerland’s SIX Digital Exchange (SDX) is the leading example of a regulated exchange that has integrated DLT-native equity token issuance and secondary market trading within a single licensed infrastructure.

SDX, licensed by FINMA as a stock exchange and central securities depository, has executed tokenized bond issuances for UBS, Credit Suisse (prior to its acquisition), and the World Bank. Its infrastructure demonstrates the regulatory gold standard for tokenized securities: a fully regulated exchange, settlement system, and custody solution operating on DLT under direct FINMA supervision.

Bond Tokenization

Bond tokenization has attracted the largest institutional capital in the securities tokenization space. The compliance framework for bond tokenization overlaps substantially with equity tokenization but has several bond-specific considerations.

See the dedicated Bond Tokenization guide for comprehensive coverage of the $10.2 billion tokenized bond market, settlement mechanics, and jurisdiction-specific regulatory treatment.

Fund Tokenization

UCITS and AIF Structures

The tokenized fund market has developed most rapidly in Luxembourg, where the CSSF has provided explicit regulatory guidance on the use of blockchain for fund unit issuance and transfer. Luxembourg’s Specialized Investment Funds (SIFs) and Reserved Alternative Investment Funds (RAIFs) are the preferred structures for tokenized alternative funds, while UCITS (Undertakings for Collective Investment in Transferable Securities) are the dominant form for retail-accessible tokenized equity and bond funds.

UCITS fund units, when tokenized, are financial instruments under MiFID II. The management company must be authorized as a UCITS management company under the UCITS Directive (2009/65/EC, as amended). The fund’s prospectus and key investor information document (KIID) must be approved by the relevant NCA (CSSF for Luxembourg funds). Secondary market trading of tokenized UCITS units requires the same MTF or organized trading facility infrastructure as equity tokens.

See the dedicated Fund Tokenization guide for full coverage of UCITS, AIFs, BlackRock BUIDL, Franklin Templeton, and WisdomTree structures.

Compliance Architecture

DLT Pilot Regime (EU)

The EU’s DLT Pilot Regime (Regulation (EU) 2022/858), operational since March 2023, is the most significant regulatory innovation for EU securities tokenization. It creates a temporary sandbox—running to March 2026 with possible extension to March 2027—for trading and settlement of tokenized financial instruments on DLT.

Under the DLT Pilot Regime, firms can apply for one of three types of permission:

• DLT MTF (Multilateral Trading Facility on DLT): Operated by investment firms or market operators, enables organized trading of tokenized securities with some exemptions from traditional MiFID II requirements.
• DLT SSS (Settlement System on DLT): Operated by CSDs or CSD applicants, enables DLT-based settlement with exemptions from CSDR requirements.
• DLT TSS (Trading and Settlement System on DLT): Combines MTF and SSS functions in a single entity, enabling integrated trading and settlement.

Market capitalization and outstanding value thresholds limit DLT Pilot Regime participation: €500 million for shares, €1 billion for bonds and other instruments per issuer. These thresholds accommodate all but the very largest institutional issuances.

ERC-3643 / T-REX Protocol

The ERC-3643 token standard (the T-REX protocol, developed by Tokeny Solutions) has become the de facto standard for EU-compliant tokenized securities. It implements:

• On-chain identity verification via ONCHAINID (a decentralized identity framework)
• Modular compliance rules enforceable at the token level (jurisdiction restrictions, investor cap rules, lock-up periods)
• Transfer agent functionality enabling forced transfers for corporate actions, court orders, and compliance purposes
• Dividend/distribution mechanics compatible with existing fund administration workflows

Major European issuances using ERC-3643 include Société Générale’s OFH tokens (on Ethereum, for covered bond refinancing), Luxembourg tokenized fund units on the Euroclear Digital Securities Issuance (D-SI) platform, and several Tokeny-platform issuances for financial institutions across the EU.

KYC/AML and Investor Onboarding

Securities tokenization platforms must implement full securities industry KYC/AML programs. For EU platforms, this means compliance with the Anti-Money Laundering Directives (5AMLD and 6AMLD) and, for CASPs, MiCA’s AML provisions incorporating FATF Travel Rule requirements.

The practical investor onboarding process for institutional tokenized securities involves: legal entity verification (LEI code, certificate of incorporation, UBO register extract), KYC of key persons (directors, UBOs above 25%), accredited/qualified investor verification, investor suitability assessment, and subscription agreement execution (electronic via DocuSign or equivalent is accepted in most jurisdictions).

Key Platforms

Securitize (US/Global): The largest US-regulated securities tokenization platform. Operates a registered transfer agent, a registered ATS (Securitize Markets), and provides full-stack issuance infrastructure. Major clients include KKR, Hamilton Lane, and BlackRock (for the BUIDL fund’s token issuance). Fully integrated with Ethereum, Polygon, and Avalanche.

Tokeny Solutions (Luxembourg): The leading EU-based securities tokenization infrastructure provider. Developed the ERC-3643/T-REX standard. Serves financial institutions including Euroclear, BNP Paribas, and SG Forge. Fully CSSF-regulated in Luxembourg.

SIX Digital Exchange (SDX) (Switzerland): The gold standard for regulated tokenized securities infrastructure. A fully FINMA-regulated exchange and CSD operating a permissioned DLT network. Institutional-only access.

HSBC Orion (UK/Global): HSBC’s proprietary tokenization platform, used for gold token issuance (HSBC Gold Token) and digital bond issuance. Regulated under the FCA’s digital securities framework and the UK Digital Securities Sandbox (DSS).

Goldman Sachs DAP (Global): Goldman’s Digital Asset Platform, used for tokenized bond issuances and repo transactions. Permissioned blockchain.

For licensing requirements across jurisdictions, see the Licensing section. For regulatory frameworks governing each market, see the Jurisdictions section.

Authority references: ESMA DLT Pilot Regime · MiCA Full Text (EUR-Lex) · BIS on Crypto-Assets