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Asset Tokenization – Part I: Legal Implications of Tokens



Asset tokenization is increasingly popular as a means to fund projects and investments. However, it carries legal implications of the tokens that need addressing to minimize legal risks.

This article explores key legal aspects to consider in token issuance, whether tokens represent personal or real rights, and if token ownership confers ownership of the underlying asset. It will delve into these legal aspects and provide examples of regulations and guidelines in different countries.




Token issuance is a complex legal transaction that occurs through both the token issuance itself and the digital representation of ownership.

The complexity varies depending on factors requiring a detailed understanding of applicable laws and regulations from different perspectives, such as token structure, regulations, investor data protection and privacy, intellectual property, tax, and legal aspects of each jurisdiction.

Currently, a token is considered a legally protected asset (digital assets or securities) under the laws and regulations applicable in each jurisdiction.

Here are a few examples of token and cryptocurrency regulations in different countries, although many more regulations and guidelines exist worldwide:

United States

The U.S. Securities and Exchange Commission (SEC) issued a report in 2017 regarding the sale of The DAO tokens, stating that tokens issued by The DAO were considered securities and thus subject to U.S. securities laws. Since then, the SEC has continued to regulate tokens and has taken strong actions against several illegal initial coin offerings (ICOs).


In 2018, the Swiss Financial Market Supervisory Authority (FINMA) classified tokens into three categories: payment tokens, utility tokens, and investment tokens.

Investment tokens are subject to Swiss securities laws. Switzerland already allows tokenized securities to trade on the blockchain with the same legal value as traditional assets.


In 2018, Malta became the first country to introduce comprehensive legislation on cryptocurrencies and tokens.

The Virtual Financial Assets Act establishes a regulatory framework for token issuance and sales.


The Monetary Authority of Singapore (MAS) has issued several guidelines on token regulation. In 2017, MAS declared that some tokens could be considered securities and thus subject to Singapore’s securities laws.

In 2019, MAS issued more detailed guidelines on token regulation and cryptocurrency exchanges.


In 2017, Japan introduced legislation recognizing cryptocurrencies as legal means of payment and regulating cryptocurrency exchanges.

Since then, the Japanese government has regulated token issuance and taken strong actions against exchanges that fail to comply with standards.



A critical question arises regarding the legal nature of tokens: Do tokens represent personal rights or real rights?

The categorization of tokens as personal or real rights depends on the type of asset or right being tokenized and the legal conditions surrounding asset tokenization.

Both types of rights are described below:

Personal rights

Also known as creditor rights, these refer to rights arising from a relationship between two parties, whether natural or legal persons.

These rights grant a person (creditor) the ability to demand performance from another (debtor), such as debt repayment or delivery of an item.

Personal rights can be assigned or transferred to third parties, and their protection is achieved through compensatory legal actions seeking fulfillment of the obligation or compensation through indemnification.

Real rights

Real rights pertain to direct control over an object. These rights grant the holder the capacity to dispose of, use, enjoy, pursue, and reclaim an object. Examples of real rights include ownership, mortgages, and usufruct, among others. These rights are enforceable against third parties through real legal actions.

However, for a real right of ownership to be established, it must fulfill certain legal requirements, such as being documented in a public deed and involving tradition, which means the transfer of possession. In the case of tokenizing assets backed by real estate, it’s important to distinguish between real ownership rights and real guarantees associated with the token.

The categorization of tokens as personal or real rights depends on the type of asset or right being tokenized and the legal conditions surrounding asset tokenization.


If a token backed by real estate is issued, the token holder may not have direct ownership of the real estate itself but rather a personal right with a stronger guarantee.

In this scenario, the real estate could be used as collateral for the token, such as mortgaging it or transferring it to a trust, but it remains a contract between parties and thus a personal right.

Thus, even if the token holder doesn’t have real ownership of the real estate, they would have a guarantee supporting their investment.

In summary, classifying a token as a personal or real right depends on the nature of the tokenized asset or right and the legal conditions surrounding tokenization in the respective jurisdiction.

It’s crucial to analyze each specific case based on applicable laws and the legal framework established for token issuance and investor rights protection.

From a counterparty risk perspective, a token backed by a mortgage or lien on an asset—representing a real right—is of lower risk than one representing credit or a personal right, such as claims on an investment fund.

Investors should thus know how to mitigate these risks through specialized legal advice and the inclusion of specific contractual clauses in the agreement binding the parties.




The fundamental question here is whether code is law. Unfortunately, it’s not; it gains that status only to the extent that a legal framework allows the autonomy of the involved parties to establish it.

Having possession of an asset, exerting control over it, and ensuring that third parties can’t access it doesn’t automatically confer legal ownership according to our legal system, neither in Europe nor in the United States.

It’s important to note that legal ownership of an asset may be subject to additional requirements, such as formalization through public deeds, property registration, or compliance with other applicable regulations and laws in the relevant jurisdiction.


Regulation of tokenized assets varies by jurisdiction

In the realm of asset tokenization and blockchain technology, while control over a token can provide a certain degree of dominion over the underlying asset, the applicable legislation in each country must be considered when determining if such control equates to legal ownership of the asset itself.

The regulation of tokenized assets varies by jurisdiction and may be subject to changes and updates as the legal landscape evolves in relation to cryptocurrencies and digital assets.


Transferring ownership of tokens on the blockchain

Generally, tokens do not represent direct ownership of an underlying asset, such as real estate; rather, they represent a right over that asset, like a portion of the value or performance of the real estate. Definitive ownership of the real estate is granted through a publicly registered deed with the competent authority.

From a technology perspective, transfers of token ownership occur through transactions recorded on the blockchain, and owners must safeguard their private keys to access those tokens.

Every transaction altering token ownership is recorded in the blockchain database, allowing real-time knowledge of the token owner but not necessarily ownership of the underlying asset.

Therefore, it’s essential to consult with a specialized lawyer in the field and in the specific jurisdiction to obtain a precise and updated interpretation of applicable laws and regulations regarding ownership of tokenized assets and the control implied by possession of those tokens.



In the context of asset tokenization, legal uncertainty regarding ownership is a primary challenge faced by investors and token issuers.

The question of whether tokens represent direct ownership of an underlying asset, like real estate, remains a subject of debate in many countries. However, there’s a technological solution that can help reduce risks associated with this legal uncertainty: fund traceability.

Fund traceability refers to the capacity to follow funds through a system that documents the origin, allocation, and movement of funds.

When tokens are created and distributed during the initial token issuance, they are linked to specific assets, such as real estate, artworks, or financial instruments.

An integrated system records every transaction, ensuring that the value of a token remains tied to the underlying asset. This means that at any given time, it is possible to ascertain who has ownership of each token, as well as trace the origin and allocation of funds.

This ensures that each token represents a right over the underlying asset and helps mitigate risks associated with the legal uncertainty surrounding token ownership.

Fund traceability provides investors with greater transparency and assurance, while also supporting compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations.

For more information please visit Bimount BM-Trusck.


Fund traceability refers to the capacity to follow funds through a system that documents the origin, allocation, and movement of funds.



While asset tokenization presents opportunities for accessing new investments and funding projects, it also involves legal implications that need to be carefully considered.

From legal implications of token issuance to real vs. personal rights and ownership of underlying assets, all legal aspects must be understood and managed to minimize legal risks.

With the emergence of fund traceability as a technological solution to legal uncertainty, investors and token issuers can gain greater transparency and assurance in the asset tokenization process. Ultimately, this helps to minimize risks, foster investor confidence, and promote the growth of this innovative financial sector.

This article is not a substitute for legal advice or expertise. It’s important to consult with a qualified legal professional who specializes in this area and who can provide tailored advice based on the specific circumstances and jurisdiction involved.


Author: Rodolfo José Monsberger, CEO and Founder of Bimount, March 2023.



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