Financial Instrument Tokenization

Definition ∞ Financial instrument tokenization is the process of representing traditional financial assets, such as stocks, bonds, or real estate, as digital tokens on a blockchain. This process converts ownership rights or economic value into a programmable, transferable digital format. It enables fractional ownership and increased liquidity for otherwise illiquid assets.
Context ∞ This concept is a key driver for the convergence of traditional finance and blockchain technology. News often highlights partnerships between financial institutions and crypto platforms or regulatory developments concerning the legal status of tokenized securities. The future expansion of financial instrument tokenization promises to reshape capital markets by enhancing accessibility and operational efficiency.