Book-entry security

In the past, owning a share or a bond meant keeping a piece of paper (a certificate) in a drawer. Today that paper has almost disappeared: what you hold is an electronic record in a register, just as your money at the bank is only a number on a screen. That is a book-entry security.

You own the security because your name appears in that register, not because you hold a piece of paper. It is the mental gateway to tokenisation: if we are already used to a security being a digital record, taking the leap to having that record live on a blockchain is far more natural.

A book-entry security is the form of representation of transferable securities through electronic accounting records, as opposed to representation through physical certificates. Its regime is set out in Ley 6/2023 on Securities Markets and Investment Services (LMVSI), which governs the representation of securities by book entries and the legal effects of registration.

Registration in the accounting register produces constitutive and legitimising effects: transfer operates through book-entry transfer, and the registered holder enjoys protection against third parties. The LMVSI has expressly incorporated the possibility of using systems based on distributed ledger technology (DLT) to maintain the accounting register of securities, which constitutes the domestic legal basis for the tokenisation of financial instruments in Spain.