--- title: Security Token url: "https://www.unknowngravity.com/en/glosario/security-token" site: Unknown Gravity published: "2025-06-07T15:18:58+00:00" modified: "2026-07-29T10:41:07+00:00" language: en-US description: "A security token is a digital asset issued on a blockchain representing financial or legal rights over an underlying asset such as a stock, bond, interest in a company, investment fund, real estate…" section: "Home > Security Token" --- # Security Token GLOSSARY · BLOCKCHAIN & WEB3 Financial instrument (share, bond or holding) represented on blockchain and subject to securities-market rules. WHAT IS IT? · FOR DUMMIES A **security token** is like a **stock or bond in digital format**. What sits behind it is a financial instrument: a share, a bond or a holding in a fund, recorded on a blockchain instead of in a traditional register. Depending on the security it represents, it can give you the right to **dividends, to vote or to receive a coupon**. You can also **lose all or part of what you invest**. It is governed by financial law, not by crypto rules. WHAT IS IT? · PRO A **security token** is a **digital asset issued on a blockchain** representing **financial or legal rights** over an underlying asset such as a **stock, bond, interest in a company, investment fund, real estate, securitized debt or other regulated financial instrument**. Unlike utility tokens, security tokens **are financial instruments** and are governed by securities-market rules: **MiFID II**, **MiFIR** and, in Spain, **Law 6/2023** (LMVSI), with the CNMV as supervisor and a designated **ERIR** (the entity responsible for registering and recording securities represented by distributed ledger technology, Arts. 7 and 8 of Law 6/2023) keeping the register. MiCA does not apply to them: it expressly excludes crypto-assets that qualify as financial instruments (Art. 2(4) of Regulation (EU) 2023/1114; Arts. 7 and 8 of Law 6/2023, BOE-A-2023-7053). This type of tokenization allows you to **digitize real or financial assets**, facilitating their **issuance, fractionalization, management, transfer and settlement** through smart contracts, improving operational efficiency and reducing intermediate costs. Investors who purchase security tokens can have access to **dividends, voting rights, economic returns, priority in the distribution of profits or equity participation**, depending on the type of security represented. To be considered a security token, the digital asset must meet the criteria established by authorities such as **SEC in the United States (Howey test)** or their equivalence in European jurisdictions. This involves requirements of **KYC/AML**, clear legal governance, risk disclosure and, in many cases, the intervention of **regulated platforms, custodians and electronic registration systems such as ERIRs**. Security tokens open up new opportunities to **finance companies, tokenize shares, issue debt or represent future rights**, and are revolutionizing sectors such as real estate investment, venture capital, corporate finance and the tokenization of RWA (Real World Assets). ## 01 / Key points - It is a token that represents a real financial security and is regulated by law - Offers the rights of the security it represents: dividends, voting or coupon, with risk of loss - It is issued on blockchain but with legal compliance - It can represent stocks, bonds, debt, funds, or tokenized assets - Requires KYC, legal audit and regulatory oversight ## 02 / Advantages - **Global and fractional access** to traditionally restricted investments - **Legal and operational automation** through smart contracts - **Traceability of the operations recorded** on the chain - **Faster settlement** than in traditional financial markets - **Reduction of intermediaries** in the issuance and post-trade servicing of securities ## 03 / Disadvantages - **High regulatory and legal complexity**, especially in the EU - **Liquidity limitations**, since they must be traded on authorized platforms - **High initial legal costs** to issue correctly - **Not suitable for issuers without specialist advice** - **Reputational risk or penalties if issued without complying with regulations** - **Risk of loss for the investor**: the value depends on the underlying asset and on the issuer RELATED CONCEPTS [Tokenization](/en/glosario/tokenizacion) [ERIR (Entity Responsible for the Registration and Recording)](/en/glosario/erir-entidad-de-registro-e-identificacion-registral) [KYC (Know Your Customer)](/en/glosario/kyc-know-your-customer) [Digital identity](/en/glosario/identidad-digital) [ERC-3643](/en/glosario/erc-3643) KEEP LEARNING [How to prevent your project from becoming (unintentionally) a security token?](/en/articulos/como-evitar-que-tu-proyecto-acabe-siendo-sin-querer-un-security-token) [Tokenization under the ERIR: everything you need to know](/en/articulos/tokenizacion-bajo-erir-todo-lo-que-necesitas-saber) [Complete guide to tokenizing companies on blockchain.](/en/articulos/tokenizacion-empresas-blockchain) [Complete Guide to Launching a Security Token Offering (STO) in Europe: Everything You Need to Know](/en/articulos/guia-completa-lanzar-security-token-offering-sto-europa-todo-lo-que-debes-saber) [CNMV and tokenization: which companies can issue regulated tokens in Spain?](/en/articulos/cnmv-y-tokenizacion-que-empresas-pueden-emitir-tokens-regulados-en-espana) [What is the difference between regulated and unregulated tokenization?](/en/articulos/tokenizacion-regulada-vs-no-regulada-diferencias-clave-y-que-debes-saber) [10 advantages of regulated tokenization compared to traditional tokenization in digital investment](/en/articulos/10-ventajas-de-la-tokenizacion-regulada-frente-a-la-tradicional-en-inversion-digital) RELATED SERVICES [Security Tokens (STO)](/en/servicios/security-tokens) [Token issuance](/en/servicios/emision-de-tokens) [Asset tokenization](/en/servicios/tokenizacion-activos) [Tokenization of real estate](/en/servicios/tokenizacion-de-inmuebles) [Data tokenization](/en/servicios/tokenizacion-de-datos) [White label tokenization platform](/en/servicios/plataforma-tokenizacion-marca-blanca) [Whitepapers](/en/servicios/whitepapers) [Full glossary](/en/glosario) This entry is informative. It is not legal, tax or investment advice. The rules cited change: check the current version on [BOE](https://www.boe.es) and [EUR-Lex](https://eur-lex.europa.eu).