Tokenized Security

Definition ∞ A tokenized security is a traditional investment asset, like a stock or bond, represented as a digital token on a blockchain. This refers to a traditional financial asset, such as a stock, bond, or real estate share, that has been digitally represented as a token on a blockchain. These tokens grant holders the same rights and obligations as the underlying security, but with the added benefits of blockchain technology, including fractional ownership, enhanced liquidity, and automated transfer mechanisms via smart contracts. Tokenized securities remain subject to existing securities laws and regulations.
Context ∞ Tokenized securities are a growing area of interest in digital asset news, particularly as traditional financial institutions explore the benefits of blockchain for capital markets. They offer the potential for more efficient issuance, reduced settlement times, and broader investor access to private markets. Regulatory bodies are actively working to establish clear legal and operational frameworks for these digital instruments, balancing innovation with investor protection.