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What changes when an asset is tokenized?
The Bank for International Settlements (BIS) describes tokenization as recording claims on real or financial assets that exist on a traditional ledger onto a programmable platform. In principle, such a platform can integrate records of assets, transfer rules, messaging, reconciliation, and transfer. The benefits depend on how the system is designed and how settlement works; they are not automatic properties of a token.
For securities, a U.S. Securities and Exchange Commission (SEC) staff statement dated January 28, 2026, defines a tokenized security as a security represented as a crypto asset where ownership is recorded in whole or in part on crypto networks. It distinguishes tokenization by an issuer or its agent from tokenization by an unaffiliated third party. Those structures may give holders different rights.
The important distinction is between changing the record or transfer mechanism and changing the underlying claim. A token’s technical connection to an asset does not, on its own, establish that its holder owns the asset, can demand its delivery, or can redeem the token directly with the asset’s issuer.
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Why a conventional risk review can miss important exposures
Many risks associated with tokenized financial assets resemble familiar financial risks. The Financial Stability Board (FSB), as summarized by the BIS Financial Stability Institute in August 2025, identifies five vulnerability groups that technology and governance arrangements may amplify. A review confined to an institution’s balance sheet or a token’s quoted price can miss how risks travel across claims, platforms, and service providers.
| Risk category | How it can arise | Questions for the assessment |
|---|---|---|
| Liquidity and maturity mismatch | A token may appear easier to trade or redeem than the asset or claim behind it. If they do not match, holders seeking redemption can create pressure or run risk. | What exactly backs or supports redemption? When and how can holders redeem? Could the reference asset be less liquid or have a longer maturity than the token appears to promise? |
| Leverage | Programmability and composability can allow a token received as collateral to be reused or rehypothecated, increasing leverage. | Can the same exposure support multiple transactions? Can collateral be reused, and are those dependencies visible to parties assessing the exposure? |
| Asset-price and quality risk | Opaque code, unregulated oracles, difficult valuations, or legal and market frictions can cause the token’s price or quality to diverge from the reference asset. | How is the reference asset valued and monitored? What information feeds any price-setting mechanism? What happens when the token price and the reference value diverge? |
| Interconnectedness | Platforms may link institutions and activities, opening paths for contagion. Continuous global operation can affect volatility and complicate oversight. | Which other activities, institutions, and platforms depend on this arrangement? How could a disruption pass between them, and who can see those connections? |
| Operational fragility | Smart-contract errors, private-key mismanagement, unclear governance, irreversible transactions, and weak accountability or resilience can produce operational vulnerabilities. | Who controls the code and the keys? Who can respond to an incident? What recovery or continuity arrangements exist, and how are responsibilities allocated? |
These categories are a starting point, not a substitute for analyzing the specific design. A weakness can cross categories: for example, limited visibility into collateral reuse can obscure leverage and make interconnectedness harder to assess.
Start with the holder’s legal claim
Identify what the holder can legally claim, against whom, and through which intermediary or register. The SEC’s January 2026 staff statement distinguishes issuer-issued or issuer-agent tokens from tokens created by unaffiliated third parties, and notes that tokenized-security structures and holder rights vary. SEC Commissioner Hester M. Peirce made the underlying point in a July 9, 2025 statement: “Tokenized securities are still securities.” She also cautioned that a third-party token tied to securities held by another entity may expose purchasers to counterparty risk. Legal classification depends on the facts and rights conveyed.
For each arrangement, document whether the holder has direct ownership, a security entitlement, a redemption claim, or another contractual right. Then identify the entity responsible for honoring that right and the record or process that establishes it. Do not infer ownership or direct redemption rights from a token’s name, price, or technical reference to another asset.
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After establishing the claim, trace the dependencies that make it usable and transferable. A practical comparison should cover these dimensions:
- Reference asset: Where is it held? How is it valued, audited, and made available for redemption or settlement? Under what conditions might token value and asset value diverge?
- Settlement asset: Is settlement in a stablecoin, tokenized bank deposit, or central-bank money? Who issues it, and what are its redemption mechanics and risk profile?
- Governance and access: Is the design permissioned or permissionless? Who has decision rights, who is accountable, and who can act during an incident?
- Infrastructure and dependencies: How does the platform connect to legacy systems? Which custodians, oracles, bridges, and protocol developers does it rely on? Are critical providers concentrated?
- Programmability and composability: Which actions are automated, and which assets or protocols can interact? Weigh any efficiency gain against code risk, leverage, opaque dependencies, and the speed at which disruption could spread.
- Risk measurement and prudential treatment: What data history, valuation basis, liquidity assumptions, and counterparty exposures support the assessment? Do applicable prudential rules treat the tokenized exposure as equivalent to the traditional asset? The Basel Framework’s cryptoasset exposures section addresses infrastructure risk and allows supervisory capital add-ons where weaknesses are observed.
Two arrangements representing claims on the same type of asset can therefore have materially different risk profiles. The legal claim, redemption chain, settlement asset, governance, and infrastructure determine what the holder depends on.
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Balance possible efficiency gains against new dependencies
Tokenization may reduce some transaction frictions. The BIS describes a design in which integrating messaging, reconciliation, and asset transfer on a programmable platform can support delivery-versus-payment, reducing counterparty risk and post-trade reconciliation. Its proposed architecture also describes settlement in central-bank reserves as a way to support finality and the singleness of money.
These are potential design outcomes, not universal empirical findings about tokenization projects. They depend on the arrangement, including the settlement asset and how finality is achieved. The FSB summary also notes that composability can create opaque dependencies, while custodians, oracles, protocol developers, and bridges add reliance on third parties. Stablecoins, tokenized bank deposits, and central-bank money have different risk profiles and should not be treated as interchangeable settlement instruments.
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Assess current scale without mistaking preparedness for crisis
The FSB summary characterizes distributed-ledger-technology-based financial-asset tokenization as early-stage, with many projects small-scale or experimental. It identifies limited investor demand, weak interoperability between distributed-ledger platforms and legacy systems, and regulatory and legal uncertainty as constraints on adoption. IOSCO’s 2025 report likewise describes a nascent ecosystem and notes that interoperability and credible settlement assets constrain scalability.
The FSB summary assesses current financial-stability risks as minimal, citing small scale, a focus on permissioned platforms, limited programmability, and low interconnectedness. It warns that risk could rise with significant scaling, greater complexity and opacity, or insufficient oversight. That is a case for building a suitable framework ahead of growth, not evidence of a present system-wide crisis.
Apply established principles to token-specific details
A tailored framework need not assume that every tokenized arrangement requires an entirely separate set of financial rules. IOSCO’s 2025 report summary says existing IOSCO principles and guidance may remain relevant because they are technology-neutral, while novel or amplified risks call for appropriate controls. The practical task is to apply established risk disciplines while explicitly mapping legal rights, infrastructure, operational arrangements, and dependencies that a conventional review might overlook.
For each arrangement, the assessment should make its assumptions visible: what the token represents, what would make it redeemable or transferable, which parties and systems must perform, and how a disruption could affect other exposures. That turns “tokenized” from a category treated as inherently safe or dangerous into a specific arrangement whose risks can be identified and managed.
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