The essence of tokenized securities is not about innovating the trading interface, but about upgrading the recording and transfer of financial rights into a verifiable, programmable shared state. This article analyzes four models of securities tokenization, a three-layer analytical framework, and how to improve settlement efficiency and collateral management.
(Background: RWA Thousand-Word Research Report: The First Wave of Tokenization Has Arrived)
(Additional context: Why is ERC-3643 the most suitable token standard for RWA?)

Table of Contents

• 1. What exactly is securities tokenization?
  • 1. Regulated fund shares and cash asset tokenization
  • 2. Native issued securities tokens
  • 3. Wrapped, custodial tokenized stocks
  • 4. Synthetic and derivative on-chain US stock exposure
  • A. Legal layer
  • B. Capital layer
  • C. Economic layer
• 2. What problems does it solve, and what value does it create?
  • Value 1: Turning multi-ledger reconciliation into a single ledger execution
  • Value 2: Changing settlement models to improve collateral efficiency
  • Value 3: Transforming compliance from post-transaction checks to pre-transaction constraints
  • Value 4: Making securities composable financial components

1. What exactly is securities tokenization?

Based on first principles, the essence of securities is not just a piece of code or a string of numbers in an account, but a set of rights enforceable by courts and regulators:

Ownership, income rights, voting rights, redemption rights, protection of client assets in bankruptcy, procedures in case of counterparty default, and asset segregation and transferability under investor protection frameworks.

Therefore, on-chain securities are not simply about replacing the trading UI with on-chain wallets or exchanges, but about engineering the following four aspects with blockchain technology to enhance transaction flow and clearing/settlement efficiency:

1. Where do rights originate: Is the token holder recognized by law as a shareholder or beneficiary?
2. Who is responsible for registration: Who is the responsible entity for the official shareholder register or equivalent record system?
3. When is the transfer final: Where does the finality of settlement occur, can it be revoked, and how are disputes handled?
4. Who bears responsibility in case of issues: What are the obligations and boundaries of brokers, custodians, transfer agents, clearinghouses?

Before formally analyzing tokenized securities, we need to classify and define this broad concept carefully and rigorously. Without a unified definition and classification, there is no common discussion framework. Combining the latest market practices, tokenized securities roughly fall into four categories, with compliance levels from low to high:

1. Regulated fund shares and cash asset tokenization

This path was scaled first and has the highest compliance level. Typical examples include various on-chain tokenized money market funds and Treasury funds products. Their advantages are simple rights structures, transparent valuation, minimal corporate actions, and controllable regulation.

Notable cases include:

BlackRock’s BUIDL product released via Securitize on March 20, 2024

J.P. Morgan Asset Management’s Ethereum-based tokenized money market fund MONY released on December 15, 2025

2. Native issued securities tokens

Tokens issued, registered, and transferred entirely on-chain.

Theoretically the purest, but due to strict regulatory, transfer agent rules, and secondary market structure requirements, progress is slow, and mature products and practices are still lacking.

3. Wrapped, custodial tokenized stocks

Third-party platforms cooperate with traditional US stock brokers, using physical stock holdings as underlying, then issuing tokens based on this, similar to ADR logic but with a more complex overall structure.

Typical examples include DeFi projects like Satblestock, which obtain US stock exposure through cooperation with traditional brokers, then anchor via on-chain minting and burning, and provide trading venues.

4. Synthetic and derivative on-chain US stock exposure

A key point for these on-chain US stock investment tools is that on-chain exposure does not equal the underlying security. This leads to higher counterparty risk for investors, and the regulatory boundaries and definitions are most sensitive, such as various US stock perpetual contracts developed under Hyperliquid’s HIP-3 protocol.

By analyzing these four different models and underlying architectures of US stock tokenization, we can abstract a three-layer framework for analyzing tokenized securities products:

A. Legal layer

Does the token represent a security interest under securities law?

Can investor rights be enforced in courts and regulatory frameworks?

Does it fall under existing rules for brokers, trading venues, clearing, transfer agents?

A key regulatory perspective here is: tokenized securities are still securities; technology does not change the nature of the underlying assets. SEC Commissioner Hester Peirce emphasized in 2025 that blockchain does not alter the asset’s fundamental nature; third-party sponsored or issued tokens may only provide synthetic exposure without shareholder rights. Further regulatory details will be elaborated later.

B. Capital layer

Who maintains the public ledger or an acknowledged equivalent ledger?

Is the token equivalent and interchangeable with traditional securities (fungible)?

Industry organization (SIFMA) clearly stated in late 2025: Tokenized and non-tokenized versions of the same share class should be legally and economically interchangeable; otherwise, issues like market fragmentation, price divergence, and weakened investor protection may arise.

C. Economic layer

Does the token represent: the underlying equity, a benefit share, or just price exposure?

Are there redemption or conversion mechanisms? Who is the redemption object, and under what conditions?

As previously mentioned, investment exposure ≠ the security itself; being able to buy at a price does not equate to ownership rights. The nature of the economic rights determines regulatory risk, counterparty risk, and whether it can enter mainstream capital pools.

After clarifying the main product logic and analysis framework, this article and subsequent series mainly discuss high-compliance tokenized securities products based on traditional financial frameworks and their issuance paths, rather than non-compliant DeFi products or platforms on-chain.

2. What problems does it solve, and what value does it create?

To summarize in one sentence —

The core value of securities tokenization is to upgrade the recording and transfer of financial rights into a verifiable, programmable, and composable shared state via blockchain technology, thereby significantly improving settlement and collateral efficiency, reducing reconciliation and compliance friction, and enabling traditional assets to have native on-chain composability and automation capabilities.

Value 1: Turning multi-ledger reconciliation into a single ledger execution

Core summary:

Tokenization transforms many complex, labor-intensive backend operations into transparent, consistent frontend rules.

Traditional problem:

In traditional markets, a single security transaction leaves records across multiple systems: exchanges ATS, broker ledgers, custodial clearing systems, transfer agents, regulatory reporting systems…

Its operation relies on a finely integrated system: message passing + reconciliation + error handling + legal accountability.

This incurs two costs:

Operational costs: reconciliation, correction, failed settlements, corporate actions heavily rely on manual and batch processes.

Time costs: settlement is not a simple one-time event but confirmed after a process cycle, thus not immediately final.

Tokenization solution:

Create a shared ledger state that multiple parties can read and verify, representing the asset state (who holds, frozen status, collateral status, post-corporate actions), and encode transfer rules as auditable executable logic.

Direct value:

Reduce reconciliation and error costs: no longer a reconciliation-driven trusted system, but a shared state-driven trusted system on-chain.

Lower failed settlement and dispute resolution costs: post-trade processing shifts from after-the-fact correction to in-process constraints.

Value 2: Changing settlement models to improve collateral efficiency

Core summary:

The core of tokenization is not just faster trading, but faster, more granular scheduling of cash and collateral.

Traditional problem:

A common misconception is that T+1/T+2 simply results from slow technology implementation. In fact, it’s a compromise due to current traditional financial structures: netting reduces liquidity needs but introduces settlement cycles, counterparty risk, and complex margin systems.

Thus, the main pain points are not speed but:

• Slow movement of collateral across systems: securities here, cash there, margin in another system
• Low asset reuse efficiency: high costs for re-hypothecation, re-financing, cross-product scheduling
• High settlement risk management costs: requiring complex margin, risk funds, and failure handling

Tokenization solution:

Tokenization places securities and on-chain cash or settlement assets on a programmable track, enabling near real-time settlement and collateral management.

Direct value:

• Reduced capital occupation: faster, more certain settlement lowers capital and margin requirements for counterparty risk
• Accelerated collateral turnover: the same collateral can serve more transactions and financing scenarios faster
• Turn cash management into native on-chain capability: this is why institutions often first tokenize money market funds, government bonds, etc.—because the immediate value is in collateral efficiency, not flashy trading interfaces or derivatives

Value 3: Transforming compliance from post-checks to pre-constraints

Core summary:

Tokenization can turn compliance from a post-hoc regulatory investigation into automatically enforced pre-transaction rules.

What are traditional problems:

In traditional markets, compliance often involves processes + records + spot checks + accountability: KYC, investor suitability, transfer restrictions, concentration limits, sanctions lists, freezing, judicial assistance… Many compliance requirements are traceable after the fact but may not prevent violations proactively.

Tokenization solution:

Embed certain compliance rules as hard constraints in asset and transfer layers:

For example, whitelist transfers, permission controls on who can buy, transfer, and where accounts can move assets.

Governance mechanisms for asset freezing, rollback, error correction, based on legitimate authorization and clear responsibilities.

Audit logs and verifiable proofs are obviously more friendly to regulators and auditors.

Direct value:

• Reduce compliance costs and violation risks: from passive problem detection to active rule setting and blocking
• Reduce cross-border distribution friction: under compliance, standardize and automate distribution and holding management
• Enhance risk visibility: especially for on-chain collateral, lending, re-hypothecation, transparency is significantly improved

Value 4: Making securities into composable financial parts

This is the most valued feature in the crypto world, and may gradually be adopted by traditional finance: composability.

Traditional problem:

Poor composability of traditional assets is not due to lack of standardization but because of inconsistent interfaces, permissions, and settlement procedures. To combine stocks + margins + lending + options into an automated strategy often requires cross-institution, cross-system, cross-time window coordination.

Tokenization solution:

• Turn securities and cash legs into standardized programmable ledger calls, enabling:
• Automated margin management
• Automated securities lending and repurchase
• Automated structured products and risk trigger thresholds
• 24/7 execution of strategies and capital scheduling

Direct value:

Enhance composability to accelerate financial innovation.

Easier distribution of niche assets: standardized interfaces reduce issuer and channel onboarding costs.

Finally, after understanding the potential value and problems solved by securities tokenization, it’s also important to clarify what tokenization does not solve and where its boundaries lie.

First, tokenization does not automatically grant regulatory exemptions; securities remain securities, and responsible parties must exist.

Second, tokenization does not inherently improve liquidity; atomic settlement may reduce counterparty risk but could sacrifice the liquidity benefits of netting.

Lastly, tokenization does not eliminate intermediaries overnight: intermediaries will shift from simple record-keeping and reconciliation to responsibilities like compliance, key management, risk control, and client protection.