Tokenised Assets: Pathways for EMDEs

Tokenised assets exist along a spectrum of design choices. These choices relate to ledger architecture, issuance pathway, custody arrangements, as well as the extent to which lifecycle functions move on-chain, the openness of the underlying network and the distribution channels through which instruments are accessed.

Classification of tokenised assets requires a multi-dimensional assessment, including an assessment of the underlying asset, the rights attached to the token, the issuance pathway, the custody model, the ledger design and the settlement mechanism.

While there are different ways in which tokenised arrangements can be structured, 4 main tokenisation approaches currently dominate markets: native issuance, custodial, collateralised and synthetic structures.

The value proposition of tokenisation derives less from fractionalisation, a key enabler in Advanced Economies (AEs), than from its potential to reduce the administrative costs of small denomination offerings, automate compliance and servicing, improve post-trade processes, support more continuous secondary-market activity and enable composability across platforms.

A pronounced perception gap exists between industry and regulators: market participants report high levels of strategic priority (4.5/5) and organisational readiness (4.4/5) for tokenisation. However, regulators assess market activity as significantly lower (2.1/5), despite assigning it a relatively high strategic importance (3.9/5).

Broadening of access to capital is a primary adoption driver for EMDE market participants. Regulators view tokenisation through a financial sovereignty lens, seeking to retain domestic capital from offshore platforms and foreign-denominated instruments. Bringing these together provides an important opportunity.

A minimum viable ecosystem for scaled adoption comprises appropriate regulatory frameworks, credible settlement infrastructure, mature DPI enablers, the availability of industry functions across the tokenisation lifecycle and secondary-market and redemption arrangements.

The asset classes deemed most likely to scale first are those characterised by illiquidity, high intermediation costs and fragmented infrastructure, particularly real estate, public securities, fixed-income instruments and commodities.

Many of the risks present in products and activities in conventional markets persist in tokenised form, but often manifest differently. For instance, fragmentation across competing, non-interoperable DLT networks and the prevalence of custom-built smart-contract standards risk splitting liquidity. Growing interlinkages between tokenised instruments and the broader cryptoasset ecosystem also create new transmission channels for financial stability shocks. Existing supervisory tools may not capture these risks.

Secondary-market activity for tokenised instruments in EMDEs remains limited, reflecting a self-reinforcing dynamic in which low liquidity discourages participation and weak participation further suppresses liquidity. This challenge is compounded by a lack of on-chain settlement instruments.

Regulatory and legal frameworks designed for assets in certificate or book-entry form do not always translate clearly to tokenised representations, particularly in EMDEs. The variety of structuring options tokenisation unlocks can also create ambiguity over investor rights and recovery prospects.

Operational and cybersecurity risks can manifest at the network level (such as node-management vulnerabilities, forking), the smart-contract level (such as coding errors, bugs) or the token level (such as theft/loss of private keys, custodial failures). Programmability can amplify these risks and windows of vulnerability that conventional business-continuity arrangements may not address.

While fractional ownership models can broaden retail access, many EMDEs face low financial literacy and limited investor protection safeguards. More complex tokenised products, combined with inadequate disclosure standards and weak governance, can heighten consumer exposure to fraud, misselling and operational failure.

Tokenisation can reconfigure instead of eliminating components of the asset lifecycle, consolidating activities such as clearing and custody into new formats. This shifts supervisory focus towards outsourcing arrangements and the identification of critical third parties.

Regulatory approaches relating to real-world assets (RWAs) can be grouped in 3 broad categories: the extension of existing securities frameworks, bespoke virtual or cryptoasset service providers regimes, and anti-money laundering registration frameworks focused on intermediaries and transactional flows. Applied in isolation, none of these approaches captures the full lifecycle of a tokenised asset.

In the majority of jurisdictions analysed, regulators have yet to set out and clarify what, when and how regulation applies to tokenised instruments. Where the rules do exist, they focus on primary market issuance. Rules on custody, transfer and post-trade activities remain under-specified.

The most effective regulatory responses combine experimentation with institutional coordination. Sandbox-based approaches remain the preferred mechanism for testing tokenisation use cases.

Legal uncertainty persists over the property rights attached to tokens, the enforceability of smart contracts, the status of private keys and the reconciliation of operational and legal settlement finality.

Interoperability across digital public infrastructure (DPI) layers (including payments, digital identity, registries and data systems) is the defining feature of a viable tokenised market development.