What is tokenisation?

What does it mean to tokenise an asset?

Think of the cloakroom at a concert. You hand over your coat and get a ticket in return. The ticket isn't the coat, but it gives you the right to collect it, and you could give the ticket to a friend. A token is that kind of ticket, except it is digital and recorded on a blockchain.

Another comparison is a land registry. In Iceland, the district commissioner's register shows who owns which property. A blockchain can play a similar role for other assets, because it shows who holds which token and when it changed hands.

Tokenisation usually happens in three steps:

1. The asset is held. An issuer buys the asset, such as a government bond or a gold bar, and has a CustodianCustodianA company that holds crypto and the keys to it on behalf of customers, such as a licensed crypto exchange. hold it.
2. Tokens are issued. A smart contractSmart contractA program that runs on a blockchain and automatically carries out what it was written to do once certain conditions are met. creates tokens, each representing a set share of the asset.
3. The tokens are traded. They move between wallets on the blockchain, and the issuer promises to redeem them for the asset or its value.

The key point is that the token isn't the asset itself but a claim on it. It is only as trustworthy as the issuer, the custodian and the legal structure that link it to the asset.

What has been tokenised?

Money

StablecoinsStablecoinA cryptocurrency designed to keep a steady price, usually by tracking the US dollar or another currency. are by far the largest example of tokenisation. Each coin is a claim on one US dollar or euro that the issuer holds in cash and short-term bonds. In October 2026 their total value was about USD 290 billion, according to the data provider RWA.xyz. Read more about stablecoins.

Government bonds and money market funds

In March 2024, the asset manager BlackRock launched its BUIDL fund on the EthereumEthereumAn open blockchain that can run applications and smart contracts, with its own cryptocurrency called ether (ETH). network. The fund invests in cash, short-term US government debt and repurchase agreements, and each token aims to be worth one dollar. Income is paid out monthly as new tokens, straight into holders' wallets.

BUIDL isn't for the general public, though. Only large investors who meet certain conditions can buy into it, and the minimum investment was USD 5 million at launch. In October 2026, tokenised funds holding US government bonds were worth about USD 15 billion in total, according to RWA.xyz.

Bonds and gold

In April 2021, the European Investment Bank (EIB) issued a EUR 100 million digital bond on Ethereum, working with the Banque de France and several large banks. The bank has since issued more digital bonds.

The PAX Gold (PAXG) token from the US company Paxos represents one fine troy ounce of gold, about 31.1 grams, in gold bars stored in vaults in London. Paxos redeems the tokens for dollars at the gold price, and large holders can take delivery of whole gold bars. This lets people own a fraction of a gold bar without storing it themselves.

Real estate

Property is often mentioned as an example, but this is where the gap between talk and reality is widest. In October 2026, the largest tokenised real estate project listed by RWA.xyz was worth less than USD 100 million. In Iceland, ownership of property is determined by registration with the district commissioner, not by a token on a blockchain. At most, a token can represent a share in a company that owns the property, and your rights then depend on the company's articles and the law of the country where it is registered.

Why tokenise assets?

• Trading around the clock. Blockchains don't close at weekends or on holidays, while stock exchanges open only on working days.
• Smaller units. A token can be split into small fractions, so more people can own a share of an asset that used to require a large sum.
• Faster settlement. In traditional securities trading, it often takes one or two working days for payment and securities to change hands. On a blockchain it can happen within minutes, with payment and delivery in a single step.
• Transparency. Anyone can see how many tokens are in circulation and where they move.
• New uses. Tokens can serve as CollateralCollateralAn asset pledged as security for a loan. In DeFi, the collateral usually has to be worth more than the loan. in other transactions or be used in DeFiDeFi (decentralised finance)Financial services, such as lending, saving and trading, that run on smart contracts on a blockchain instead of through a bank or other middleman., financial services that run on smart contracts.

What are the risks?

• Your claim depends on the issuer and the law. A token is never better than the promise behind it. If the issuer goes bust, or the legal link between the token and the asset is unclear, getting the asset may be difficult.
• Custody. Someone has to hold the actual asset, whether gold, bonds or cash. If the custodian fails, it doesn't matter how well the blockchain works.
• Smart-contract bugs. Code controls the tokens, and a bug in it can cause losses.
• Limited LiquidityLiquidityHow easily an asset can be bought or sold quickly at a fair price, without the trade moving the price much.. Trading may be possible around the clock, but there is no guarantee of a buyer. Many tokens rarely change hands.
• Rules differ by country. Regulation varies from country to country, and issuers often restrict who can buy based on where they live.

Which networks are used?

Ethereum is by far the largest network. In October 2026, about 40% of the value of tokenised assets other than stablecoins was on Ethereum, according to RWA.xyz. It has the longest track record, and standards such as ERC-20ERC-20A standard for tokens on the Ethereum network that lets every wallet and service receive and send them in the same way. make different tokens compatible with each other.

Other networks play a part too. BUIDL, for example, is also issued on Avalanche and Solana. On Hedera, tokens have been issued for units in a money market fund run by the British asset manager Aberdeen, and Lloyds Bank has accepted them as collateral in foreign exchange trades.

Chainlink isn't a blockchain but a so-called OracleOracleA service that brings outside information, such as prices or weather data, into smart contracts on a blockchain.. It brings outside information onto blockchains, such as prices and the state of reserves, and connects different chains. In 2023, Swift, the system banks use for international transfers, used Chainlink in experiments with more than a dozen financial institutions. The aim was to move tokenised value between different blockchains.

Which rules apply?

In the EEA, including Iceland, the rules that apply depend on what kind of token it is.

MiCAMiCAThe EU regulation on markets in crypto-assets, in force in Iceland since 1 January 2026, which sets the same rules for crypto services across the EEA. covers crypto-assetsCrypto-assetThe legal term for cryptocurrencies and tokens, meaning a digital representation of value or rights that can be transferred and stored on a blockchain. that don't fall under other financial legislation. It divides them into three groups:

• E-money tokensE-money token (EMT)A stablecoin that tracks a single official currency, such as the dollar or the euro. Under MiCA, only banks and e-money institutions may issue one. track a single official currency, as USDC tracks the US dollar.
• Asset-referenced tokensAsset-referenced token (ART)A crypto-asset that aims to keep a stable value by referencing other assets or a mix of them, such as several currencies, gold or other crypto-assets. track other assets or a basket of assets, such as a commodity like gold, or several currencies.
• Other crypto-assets, such as bitcoin and ether.

Tokenised securities fall outside MiCA. Tokenised shares, bonds and fund units are financial instruments. They are covered by the same rules as traditional securities. These are based on the MiFID II directive, and in Iceland they are set out in Act No. 115/2021 on markets in financial instruments. You therefore get the same investor protection as if the security weren't on a blockchain.

The pilot regime. To test the technology, the EU created a pilot regime, Regulation (EU) 2022/858 (the DLT Pilot Regime), which has applied since 23 March 2023. It lets trading venues and central securities depositories trade and settle tokenised securities on a blockchain, with temporary exemptions from some rules. It only covers smaller issues, such as shares in companies with a market capitalisation below EUR 500 million. In Iceland the regime was enacted by Act No. 56/2024, which took effect on 5 July 2024.

Closing thoughts

Tokenisation brings traditional assets such as money, government bonds and gold onto blockchains, where they can be traded around the clock and in small units. Stablecoins show the idea works at scale, and large financial institutions have started to use it.

Remember, though, that a token is a claim, not the asset itself. Find out who issues it, who holds the asset behind it and which rules apply before you trade a tokenised asset.