Asset tokenization
What is the Tokenization of assets and how can it transform the liquidity, accessibility and management of traditional assets?
Asset tokenization is the process by which a real asset or an economic right is represented by digital tokens on blockchain, allowing for new forms of investment, financing and wealth management.
We explain to you What is asset tokenization, how does it work, what types of assets can be tokenized and what legal aspects must be taken into account in Spain, with a practical approach aimed at companies and investors.
In Unknown Gravity we help structure tokenization projects with economic sense, legal support and real technical viability.
Physical and digital assets
Accessibility and fractionation
Regulatory and Legal Compliance
What is asset tokenization and how does it work?
Asset tokenization involves creating a digital token that represents a real or digital asset on a blockchain.
This token acts as a digital version of the physical or intangible asset, allowing it to be exchanged quickly, securely and transparently.
The concept of tokenization is increasingly known and is gaining great relevance in the world of technology, the economy and even society.
Depending on how it is defined, this token can represent all of what is tokenized or a fraction of it.
What does it mean to tokenize an asset?
When we tokenize an asset, what we do is transfer all the properties of what we want to a “token” in the blockchain, thus achieving its digitization.
In simpler words, turning an asset of everyday life into a digital asset.
With this, what we achieve is that the asset is easier to transfer, fractionate or market. Without the problems, they can usually have physical assets.
Fragmentation of an asset consists of dividing its total value into small parts, where each part is represented by a token.
This allows multiple people to co-own the same asset, since each token represents a fraction of the tokenized asset, which can include specific rights such as ownership, revenue sharing, access to services...
For example, in the case of a work of art:
- A single token can be created to represent the entire work itself in its entirety, having full rights to it.
- Generate multiple tokens that grant rights to a fraction of the total value, so you could be a co-owner of that work.
All of this is securely recorded and managed using the blockchain.
Difference between tokenized assets and cryptocurrencies
The key difference between the two is their origin and purpose:
- Cryptocurrencies are purely digital assets, created within a blockchain ecosystem and that have no direct support in the physical world.
- Tokenized assets, on the other hand, have tangible support, since they represent a real-world asset.
In terms of their use, cryptocurrencies are used as digital money or as an investment, while tokenized assets serve to facilitate the commercialization of physical or financial goods, allowing more people to participate in their property.
Regulation and legal compliance in the tokenization of assets in Spain
The tokenization of assets It's not just a technological innovation, but rather a process that must fit properly into the European and Spanish legal and regulatory framework.
Ignoring this point is one of the main reasons why tokenization projects fail.
The role of the CNMV and the ERIR in asset tokenization projects
In Spain, the CNMV is the body responsible for the supervision of the securities markets and the protection of investors.
La ERIR, (Entity Responsible for the Registration and Registration of tradable securities based on TRD) also plays a very important role.
When a token:
- represents economic rights,
- is linked to financial assets,
- or is offered as an investment instrument,
may be subject to supervision, authorization or registration by the CNMV.
Tokenization It does not eliminate regulatory obligations: simply change the technological medium on which the rights are represented.
MiFID II and security tokens in Europe
When tokens represent financial instruments, fall within the scope of application of MiFID II.
This involves, among other things:
- classification of the token as a tradable security or other financial instrument,
- reporting and transparency obligations,
- inverter protection,
- requirements for marketing and distribution.
In practice, many Security Tokens they must first be analyzed under MiFID II, before even considering other regulatory frameworks specific to cryptoassets.
MiCA and its impact on asset tokenization
The European Regulation MiCA establishes a common framework for certain cryptoassets, reinforcing:
- the transparency of issuers,
- governance,
- retail investor protection.
Although MiCA does not regulate financial security tokens (which are still under MiFID II), does affect:
- non-financial tokens,
- operational aspects,
- cross-border issuance and marketing,
- cryptoasset service providers.
Therefore, both frameworks must be analyzed in a joint and non-exclusive way.
The importance of a legal structure consistent with technology
A common mistake is to think that “the token contains the right”.
Actually:
- Does economic or legal law exist outside the blockchain,
- the token acts as technical representation,
- there must be full coherence between legal contracts and smart contracts.
In Unknown Gravity we always approach tokenization from a perspective Legal-First, ensuring that the technical architecture correctly reflects the legal reality of the asset.
Technology behind tokenization
Blockchain technology is the basis that underpins tokenization, this is because it provides an immutable and transparent record of all transactions made with tokens. This increases trust by eliminating the possibility of manipulation or fraud in records.
Thanks to blockchain, it is possible to manage and trade assets, turning them into digital representations, thus managing to transfer and manage them in a global and secure way.
Blockchain and Smart Contracts
To put ourselves in context, we must bear in mind that smart contracts are self-executing programs once the predefined conditions are met.
In the field of tokenization, smart contracts are associated with tokens, thus helping to establish the conditions and restrictions of the token, such as the period of validity, legal obligations, property rights, form of payment, and so on.
Popular tokenization networks and protocols
For the tokenization of assets, it is extremely important to choose a blockchain that meets a series of key characteristics:
- Scalability, tokenization can lead to a high demand for transactions that the blockchain must be able to handle. Thanks to this feature, the experience will be smooth and network congestion will be avoided, causing the commissions to market it to be high.
- Security, the platform must have high cryptographic security measures to protect assets and transactions.
- Interoperability, this allows the transfer of tokens between different blockchain networks, facilitating integration with existing systems, improving the efficiency and adoption of asset tokenization.
Taking into account the above, let's get to know some of the blockchain networks used to tokenize assets:
- Ethereum
One of the most popular platforms. In addition, its developer community and strong infrastructure make it a reliable and versatile option for projects looking to digitize real-world assets. - Solana
It stands out for its speed and ability to handle large volumes of transactions, ideal for tokenizing assets that require fast operations, such as stocks or bonds. On the other hand, its scalability should also be mentioned, from which projects that need to manage high demand without compromising efficiency can benefit. - BASE, Arbitrum, Polygon and other L2 based on EVM
They are blockchains based on Ethereum. Much faster than Ethereum, with lower fees and great versatility.
Asset Tokenization Use Cases
Real estate tokenization
La Tokenization of real estate, consists of converting the rights of a property into digital tokens, this results in the value of the property being divided into small parts.
What is achieved with this?
It is possible that this property can be purchased by several people, thus eliminating the economic barrier. In addition, investors can decide how much they want to invest in a property and diversify that investment into multiple properties.
A well-known example could be the case of Reental, a Spanish platform that has tokenized multiple properties, thus allowing anyone to invest in real estate without the need for large capital. As an example, this company even divided a 99,000€ house in Valencia into 994 tokens, i.e. only 100€ per token.
Finance and Digital Securities
In the field of finance, we also find the tokenization of bonds and stocks, thus making it possible to issue, transfer and trade on blockchain platforms. This allows issuers and investors to access new markets and eliminate barriers to entry.
To better differentiate it, let's see some real examples of both:
Tokenized actions
Tesla, Apple and Amazon
Platforms such as Synthetix and Mirror Protocol offer tokens that replicate the value of the shares of companies such as Apple (AAPL), Tesla (TSLA) and Amazon (AMZN), allowing investors to trade these assets on the Ethereum blockchain.
Tokenized bonds
Santander Bank
It issued a 20 million dollar bond on the Ethereum blockchain, marking a milestone as it was one of the first fully digitized bond issues by a traditional financial institution.
NextBridge
This Salvadoran platform completed a 30 million dollar token sale backed by United States Treasury bonds, using the Bitcoin blockchain through the Liquid Network protocol 2.
Other physical assets: Gold
Paxos Gold (PAXG): PAXG, an ERC-20 token on the Ethereum blockchain, represents an ounce of gold stored in high-security vaults in London.
This token allows investors to own and transfer gold in a more accessible and efficient way than traditional methods.
Digital art and collectibles
When we talk about art and digital collections, certifying the authorship and ownership of each one thanks to blockchain technology is of vital importance. With these characteristics, it has marked a new frontier for artists and collectors. This is because they have democratized the art world, allowing many artists who did not find their space in traditional galleries to now have a showcase before a global audience.
On the collectors' side, it has also opened a door to acquiring art in a more accessible and user-friendly way.
Asset tokenization is not about digitizing for the sake of digitizing, but about design sustainable models, regulated and aligned with the real economy.
Related Services
Frequently Asked Questions (FAQs)
Are all tokenized assets subject to MiFID II?
No. Only tokenized assets that are considered a financial instrument fall within the scope of MiFID II.
For example:
- tokenized actions,
- shareholding,
- certain structured economic rights.
Other tokenized assets may be left out of MiFID II, but remain subject to other regulations, so a prior case-by-case analysis is always necessary.
Does MiCA replace MiFID II in tokenization projects?
No. MiCA and MiFID II are complementary frameworks, not substitutes.
- MiFID II regulates financial security tokens.
- MiCA regulates other cryptoassets and service providers.
A common misconception is that MiCA “simplifies” financial tokenization. Actually, serious projects must analyze both frameworks in a coordinated manner.
What risks are there if an asset is tokenized without prior legal analysis?
Tokenizing without proper legal analysis can involve:
- regulatory non-compliance,
- nullity of the structure,
- administrative sanctions,
- loss of investor confidence,
- unviability of the project in the medium term.
Tokenization does not reduce legal risk; Makes it more visible if it's not properly structured from the start.
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