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Tokenisation: What It Could Change in the Economy
When bonds, fund units or property rights exist as digital tokens: what tokenisation means, where it is already used and which questions remain open.
A bond that no longer exists as a certificate held at a central securities depository but as an entry in a digital register: what sounds like a distant prospect has been legally possible in Germany for several years and is being tried out in the first issues. This article explains what tokenisation means, which rules apply in Germany and the EU, where the technology is already in use and which questions still have to be resolved before it can be used widely.
What tokenisation means
Tokenisation means representing a right to an asset as a digital unit, a so-called token, in a distributed register. Such a register, known as a distributed ledger, is not kept by a single body on a single computer but maintained in a coordinated way across many computers. The blockchain is the best-known form. The token can stand, for example, for a claim arising from a bond, for a fund unit or for a share. The right is then transferred and evidenced via the register.
It is important to distinguish between the token and the asset behind it. A tokenised security remains a security in law, with the same obligations for issuers, intermediaries and trading venues. The European Securities and Markets Authority (ESMA) has stated in guidelines that tokenisation should play no part in whether something is classified as a financial instrument. Crypto-assets that are not financial instruments, by contrast, are governed by the EU Markets in Crypto-Assets Regulation, MiCA for short. It has applied in full since 30 December 2024, and its rules for e-money tokens and asset-referenced tokens since 30 June 2024.
The framework in Germany
Germany created its own rules early on. The German Electronic Securities Act (Gesetz über elektronische Wertpapiere, eWpG) has been in force since June 2021. It allows securities to be issued without a paper certificate, with the issuer having them entered in an electronic securities register. The act recognises two forms: central registers, such as those kept by a central securities depository, and crypto securities registers on a tamper-proof recording system, in practice usually a blockchain. Under the act, an electronic security in principle has the same legal effect as a security with a certificate.
Initially, the eWpG applied to bearer bonds, that is conventional bonds. Units in investment funds can also be issued as electronic unit certificates under the German Investment Code (Kapitalanlagegesetzbuch). At the end of 2023, the Future Financing Act (Zukunftsfinanzierungsgesetz) extended the framework to shares: since then, registered shares can also be created as crypto securities, and bearer shares via a central register. Anyone who wants to keep a crypto securities register needs authorisation from BaFin, Germany's Federal Financial Supervisory Authority.
Europe tests new market infrastructure
At European level, the DLT Pilot Regime, Regulation (EU) 2022/858, has allowed trading and settlement systems based on distributed ledgers to operate since 23 March 2023. It works like a testing framework: under certain conditions, operators may depart from individual requirements that were written for traditional infrastructure. In return, caps apply, such as a market capitalisation of less than 500 million euros for shares and an issue volume of less than one billion euros for bonds. In December 2024, BaFin granted its first authorisation for such a combined trading and settlement system.
For the cash side of such transactions, the Eurosystem, made up of the European Central Bank and the national central banks of the euro area, has taken an important step. On 21 September 2026 it launched Pontes, a solution through which wholesale transactions in tokenised assets can be settled in central bank money, that is the money banks hold at the central bank. According to the European Central Bank, the first participants include the European Investment Bank, KfW and the Deutsche Bundesbank. The full range of functions, with longer operating hours, is planned by 2028. Private-sector solutions for the cash side are also being discussed, among them stablecoins.
Where tokenisation is already in use
A well-documented example comes from KfW, the German state-owned development bank. In July 2024 it issued its first blockchain-based digital bond under the eWpG. Its third bond of this kind, worth 100 million euros, issued in June 2026 and maturing in December 2027, was put through a stress test in September 2026: for the first time in Germany, the registrar and the underlying blockchain were changed during the term of a crypto security. According to KfW, nothing changed for investors. KfW intends to settle the interest payment in December 2026 via Pontes.
Alongside bonds from development banks, the first Pfandbriefe (German covered bonds) issued as crypto securities already exist in Germany. Tokenisation is also being discussed for property and other tangible assets. In such cases, the token usually stands for a stake in a company or for a security, not directly for ownership of the asset itself. In Germany, ownership of land is still transferred via the land register (Grundbuch). What always matters, therefore, is which right the terms and conditions actually embody.
Possible advantages
- Faster settlement: security and cash can be exchanged almost simultaneously in the same system.
- Divisibility: rights can be split into small units, which can make lower minimum amounts possible.
- Programmable processes: smart contracts can trigger interest payments or transfers according to fixed rules.
- Longer trading hours: a distributed ledger has no closing bell, so round-the-clock trading is technically conceivable.
- Fewer intermediate stages: register, custody and settlement move closer together, which can reduce reconciliation work.
Whether these advantages materialise on a large scale depends on volumes, standards and the connection to the rest of the financial system. Many of today's issues are deliberately designed as test runs to find out precisely that.
| Issue volume | €10,000,000 |
|---|---|
| Conventional minimum denomination (assumption) | €100,000 |
| Number of units, conventional | 100 |
| Denomination as a token (assumption) | €1,000 |
| Number of tokens | 10,000 |
| Interest per token per year at 3 % | €30 |
| Total interest payment per year | €300,000 |
All figures are invented assumptions. The smaller denomination makes partial amounts technically easier, but it changes nothing about the interest rate, the term or the issuer's default risk. Whether small units are also offered to retail investors depends, in addition, on prospectus and distribution rules.
A token changes the form of a right, not its economic substance or its risk.
Open questions
These possibilities are set against unresolved issues. Legal certainty often ends at the national border: a German crypto security is clearly regulated under German law, but cross-border transactions raise the question of which law governs transfer and insolvency. Then there is liquidity. A market on which only a few tokens are traded may, when it comes to it, offer no buyer at the desired moment, and round-the-clock trading then remains a theoretical possibility.
Custody and standards are also still work in progress. Anyone who holds tokens on behalf of customers needs a licence to do so and secure procedures for the digital keys. The changeover of the KfW bond showed how important interoperability is: because the old and the new blockchain use different technical standards, new tokens had to be created and the old ones deleted. And finally, the link between the token and the real asset remains decisive. A token is only as reliable as the issuer, the terms and conditions and the register on which it rests.
Tokenisation does not replace the existing financial system; it offers a new way of embodying and transferring rights. Germany and the EU laid the legal foundations for it early on, and with settlement in central bank money a key building block has become available. How much markets change as a result will be decided less by the technology than by common standards, legal certainty across borders and the willingness of large market participants to use the new channels for the long term.
Frequently asked questions
Is a tokenised security legally different from a conventional one?
No, as a rule it is not. A crypto security under the German Electronic Securities Act (eWpG) in principle has the same legal effect as a security with a certificate; only the form of issue is digital. Under supervisory law, too, a tokenised financial instrument remains a financial instrument, and the rules for issuing, distribution and trading continue to apply accordingly.
Does MiCA also apply to tokenised bonds?
No. The EU Markets in Crypto-Assets Regulation covers crypto-assets that are not financial instruments, such as e-money tokens or asset-referenced tokens. Tokenised bonds or shares are financial instruments and are subject to existing securities law. Whether a token is a financial instrument depends on how it is structured and is assessed case by case.
What is Pontes?
Pontes is a Eurosystem solution that was launched in September 2026. It links platforms for tokenised assets with settlement in central bank money, initially for wholesale transactions between banks and other professional market participants. Its range of functions is to grow step by step until 2028, including longer operating hours.
Does tokenisation make an investment safer?
No. The digital form does not change the economic risk of the underlying asset, such as an issuer's creditworthiness or price fluctuations. On top of that come questions of its own about custody, technology and tradability. Tokenisation can simplify processes, but it does not replace a careful look at the issuer and the terms.
Terms
- Tokenisation
- The representation of a right to an asset as a digital unit in a distributed register.
- Crypto security
- An electronic security under the German Electronic Securities Act (eWpG) that is entered in a crypto securities register.
- Smart contract
- Code stored in the register that automatically carries out agreed processes such as payments or transfers according to fixed rules.
Sources
- Gesetz über elektronische Wertpapiere (eWpG) (in German)Bundesministerium der Justiz
- DLT Pilot RegimeESMA
- Neue Spielregeln für einen neuen Markt (MiCAR) (in German)Federal Financial Supervisory Authority (BaFin)
- Eurosystem brings central bank money to tokenised financeEuropean Central Bank
- KfW passes ‘stress test’ with third blockchain bondKfW
Image: illustration, created with AI.
