Skip to content

GLOSSARY · BLOCKCHAIN & WEB3

Tokenization

The process of representing on blockchain tokens the rights over a real or digital asset. The token mirrors the right; it does not transfer it on its own.

WHAT IS IT? · FOR DUMMIES

Tokenization means representing something from the real world (a house, a painting, a ticket) with a digital record called a token, which you can move over the internet. It is used to manage and transfer with less friction, but it does not replace legal title. With real estate you still need a contract and delivery, and it is the notarial deed and the Land Registry that make it good against third parties. The token reflects the right, it does not create it (Arts. 609 and 1462 of the Spanish Civil Code).

WHAT IS IT? · PRO

Tokenization is the process by which a physical or intangible asset is digitally represented in the form of one or more tokens registered on a blockchain, allowing for its fractionalization, transfer, traceability and automated management. Tokenized assets can be fungible (such as shares, points or digital money) or non-fungible (NFTs) (such as works of art, unique properties, or digital identifiers).

From a technical perspective, a token can represent:

  • Rights over assets (buildings, vehicles, works), within the legal structure that supports them.
  • Financial rights (stocks, debt, dividends).
  • Access to services or platforms (utility tokens).
  • Unique identity or certifications (NFTs, credentials, registrations).

Tokenization allows these assets to:

  • Be divided into smaller fractions accessible to more users (democratization).
  • Be exchanged immediately and without friction through smart contracts.
  • Be verified transparently and immutably.
  • Be programmable: they can include usage rules, royalties, veto rights or governance.

There are different levels and approaches to tokenization:

  • Legal or regulated tokenization: when the token has explicit legal support (stocks, bonds, real estate).
  • Economic tokenization: when value or liquidity (stablecoins, commodities) is tokenized.
  • Functional tokenization: when access, reputation, or utility in a digital ecosystem is tokenized.

The technology behind this process is usually based on standards such as ERC-20, ERC-721, ERC-1155 or ERC-3643, depending on the type of token and its functionalities.

In Europe two regimes coexist. If the token is a financial instrument (a share, a bond, a unit), it is governed by MiFID II and, in Spain, by Law 6/2023: an issuance document is required and an ERIR (the entity responsible for registering and recording securities represented by distributed ledger technology, Arts. 7 and 8 of Law 6/2023) must be appointed to keep the register. If it is not, it falls under MiCA as a crypto-asset, with a white paper notified to the competent authority. The first decision is therefore not which blockchain to use, but which regime the asset belongs to (Arts. 2(4) and 4 of Regulation (EU) 2023/1114; Arts. 6-8 of Law 6/2023, BOE-A-2023-7053).

Getting that classification right is what opens the door to secondary markets and to compliance automation in sectors such as real estate, energy, art, logistics and finance.

01 / Key points

  • Represents rights over real or intangible assets as digital tokens
  • Facilitates fractionability and the transfer of rights, with potential liquidity where a market exists to trade them
  • It can apply to physical assets, legal rights, financial value or digital functionality
  • It relies on smart contracts and blockchain for traceability and technical control, without removing risk
  • It can be regulated or not, depending on the type of asset represented

02 / Advantages

  • Global and faster access to participation in the asset, as far as its legal structure allows
  • Reduction of intermediaries and bureaucracy in asset management
  • fractionalization of the rights over traditionally illiquid assets, with potential liquidity where a market exists to trade them
  • Automating payments, dividends, royalties and usage rights
  • Traceability, transparency and integrity of records

03 / Disadvantages

  • Legal risk if the legal framework is not properly structured
  • Technological and operational complexity in the implementation
  • Lack of interoperability between networks and standards in some cases
  • Negative perception due to misuse in speculative markets
  • Dependence on technological and regulatory adoption in each country

RELATED CONCEPTS

Token NFT (Non-Fungible Token) Fungible Token ERC-20 ERC-721 ERC-1155 ERC-3643 Real World Assets (RWA)

KEEP LEARNING

Why will tokenization change the way we invest in the coming years? From paper to token: how to transform traditional assets into digital Tokenization under the ERIR: everything you need to know Success stories in tokenization: companies that revolutionized their markets What is the difference between regulated and unregulated tokenization?

RELATED SERVICES

Asset tokenization Tokenization of real estate Data tokenization Stock tokenization: Convert your shares into tokens White label tokenization platform

Full glossary

This entry is informative. It is not legal, tax or investment advice. The rules cited change: check the current version on BOE and EUR-Lex.