Max Maisonrouge Contributes To The Bretton Woods Committee's Paper On Tokenized Assets

INTRODUCTION

In the last five years, digital assets have risen to promi nence globally. Their transformative potential has been widely acknowledged. Tokenization facilitates financial asset digitalization with significant potential benefits, ranging from faster and lower-cost transactions and reduced settlement risk to greater ease of use, data privacy, and consumer protection from fraud. In the financial realm, tokenization creates a digital repre sentation of a financial asset such as a bank deposit, a stablecoin, an equity or fixed-income asset, or a deriv ative obligation. Such tokenized assets are represented on a blockchain or distributed ledger. Tokenized assets other than stablecoins will be the focus of this paper.

Tokenization generates both benefits and risks. Through blockchain and distributed ledger technolo gies (DLTs), tokenization extends financial markets to programmable assets, fractional ownership structures, near-instantaneous settlement, and continuous global market access. However, tokenization also introduces new technical vulnerabilities: the risk of increasingly fast financial spillovers and governance challenges that can result in permanent asset loss.

To facilitate effective tokenization, regulators must establish clear, fit-for-purpose standards and legal frameworks that provide regulatory certainty while fostering innovation. Current initiatives at the national level around the world include developing comprehen sive consumer protection mechanisms, systemic risk monitoring, and coordination. Policy makers are also exploring whether and how to safeguard financial sta bility through appropriate capital requirements amid rising concerns that lack of cross-border policy coordi nation could create a "race to the bottom." Finding ways to facilitate interoperability will be crucial to preserving the benefits of financial tokenization.

Crucially, this paper adopts an outcomes-based approach, differentiating among the major types of tokenized services—from payments to investment securities—to analyze the benefits, the risks, and the regulatory regime that might best manage the trade-offs between safety and soundness and innovation as well as between national sovereignty and international harmo nization. The paper begins by defining the concept of tokenization. It then explores some of the benefits and associated risks, followed by an overview of the differ ent regulatory approaches that are being implemented around the world. The concluding section outlines how regulators can best unlock the potential of tokenization.

We conclude that the Bank for International Settlements (BIS), International Monetary Fund (IMF), and World Bank (WB) each have an important role to play. The BIS and IMF must continue acting as trusted international convening forums and knowledge clearinghouses. The WB must ensure that developing economies are not left behind and are also able to reap tokenization's potential benefits.

Overall, regulators will need to ensure interoperabil ity as sovereign states make diverging policy choices. It will not be easy. Policy makers seeking to advance interoperability priorities will need to balance global coordination and cooperation against domestic pri orities. Information access will be key. It is crucial for policy makers to have access to quality and timely data in order to understand flows and make data-driven policy decisions based on that information. Policy makers requiring access to data from tokenization initiatives include both regulators and central banks, which can create complex but surmountable prob lems for economies that accept the fundamental role of the central bank. Relatedly, liquidity provisions that form the bedrock of economic functioning will need to evolve operationally in a tokenized world.

1. DEFINING THE CONCEPT

Tokenization is the broad concept of representing an item digitally. This paper specifically addresses on-chain digital assets. In this context, tokenization articulates ownership or rights to an asset represented on a blockchain or other ledger in digital form that can be programmed, transferred, and managed through automated processes. The digital token itself func tions as a cryptographic representation linked to a claim of ownership or entitlement. When functioning at maximum efficiency, tokenized assets are subject to the legal and contractual framework governing the underlying asset. Although not all tokenization involves enforceable rights, in principle, a tokenized asset can be verified, transferred, and tracked across distributed networks. Consequently, smart contracts can be used to automate transactions and compliance.

DLT places pressure on some traditional concepts of property and regulatory law, as discussed in box 1.

Broadly, tokenized assets can be systematically catego rized into three distinct classes:

• Real-world asset tokens represent traditional off-chain assets, including real estate, com modities, bank deposits, and securities. These tokens require legal and custodial frameworks to maintain the connections between the digital representations and the underlying physical or legal assets.
  • Examples: Asset-backed tokens (e.g., toke nized real estate or gold), tokenized twins or synthetic mirrors (i.e., blockchain rep resentations of traditional securities), and stablecoins¹
• Blockchain-native financial instruments repli cate established financial products, such as bonds, structured products, and debt securities, but they are issued, traded, and settled entirely on-chain. These instruments are natively digital and lever age blockchain-enabled automation capabilities.
  • Examples: Digital native bonds (e.g., UBS CHF 375 million digital bond),² on-chain structured products (e.g., Ribbon Finance DeFi Options Vaults),³ on-chain debt instru ments (e.g., Maple Finance loans),⁴ and central bank digital currencies
• Crypto-native digital assets comprise entirely novel asset classes with no close one-to-one analogues in traditional finance, though some features resemble traditional financial claims. These assets exist exclusively within digital eco systems and are enabled by the unique properties of decentralized networks.
  • Examples: Distributed finance (DeFi) liquid ity provider tokens, governance tokens, yield-bearing non-fungible tokens, and native tokens such as SOL or ETH

The characterization of a tokenized product holds important implications for the rules that will govern its use. Furthermore, the form in which the technology is deployed matters. Whether an asset is tokenized on a permissioned (restricted access) versus permissionless (open access) network, or even using a non-DLT data base, changes the nature of governance, legal clarity, and settlement finality.

Currently, a patchwork of individual national regulatory regimes creates different standards for the regulation and governance of tokenization globally. Stated simply: no two national frameworks are the same. Before describing those differences, we will first discuss why governments and regulators seek to capture the benefits and address the risks associated with this asset class.

Box 1. Defining tokenized assets

Definitions can vary depending on the tokenization structure. For example, a tokenized security, a toke nized deposit, and a tokenized derivative constitute economically and legally distinct tokenization assets.⁵ It is especially important to be precise in a legal context. The International Swaps and Derivatives Association's legal committee has published a good general defini tion of tokenization: "'tokenization' broadly refers to a technological and legal process of attaching enforce able rights to entries in a DLT-based system. In this context, a 'token' is represented by data recorded in such a system"⁶ (emphasis added).

Another fundamental legal aspect of tokenization is how any applicable regulatory frameworks will apply to the tokens. The financial marketplace is highly reg ulated; the characterization of a tokenized product or transaction holds important implications for the rules that parties will need to observe. Finally, legal systems and financial authorities continue to grapple with the challenge of how best to advance the fundamental objectives of market regulation in the context of new f inancial instruments and market structures represented by tokenized assets. While the objectives of market integrity, investor protection, and systemic safety have been top priorities of many jurisdictions, authorities have sought to achieve these objectives in varied ways.

2. BENEFITS AND RISKS

Tokenization adoption holds distinct implications for different financial system participants:

• Investors gain access to fractional ownership opportunities, enhanced liquidity, continuous market access, and reduced counterparty risk from smart contract execution.
• Issuers can access expanded capital markets, accelerate settlement time frames, and reduce intermediary dependence.
• Market infrastructure providers, including exchanges and platforms, can expand service offerings and develop new revenue streams.
• Regulatory authorities may benefit from enhanced transaction transparency and traceability, depend ing on system design and access rights.

The technology also introduces new risk categories, including the potential for smart contract failures, network congestion, and governance attacks. Most critically, because tokenization transcends traditional jurisdictional boundaries, it creates new opportunities for regulatory arbitrage and makes consistent compli ance and enforcement more difficult.

Moreover, the speed of financial flows would certainly accelerate in a world where atomic settlement became the norm for wholesale transactions. Such increased transaction velocity, with assets moving at the speed of light, creates unique and important challenges for central banks seeking to act as credible lenders of last resort.

In addition, although distributed ledgers may provide immutable records of transactions, it remains very much open to debate whether and how much access to trans action-level information might be available to economic policy makers. If they cannot see the information, then their ability to perform their roles will be compromised.

Asset tokenization also will increase cross-border economic engagement, potentially constraining tra ditional domestic policy tools and heightening the need for timely and coordinated risk management by public authorities. Policy makers will still be viewed as accountable at the national level even when bad actors, technological failures, or flash crashes abroad create local economic losses. Effective crisis prevention and mitigation therefore depend not only on legal mandates but also on relationships and communication frame works. This requires building new structures now, or at least maximizing the utility of existing cross-bor der communication structures, before systemic stress points become five-alarm fires. The ability to realize tokenization's promise to reduce costs and increase access requires addressing these regulatory coordina tion challenges.

3. THE CURRENT REGULATORY STATE OF PLAY

Policy Choices

Overall, three initial frameworks are emerging from policy makers:

• Fully decentralized private-sector distributed ledgers: Various U.S. initiatives seek to acceler ate the capacity of individuals to allocate capital and transact business on potentially a multi tude of distributed ledgers. Pending legislation in Congress focuses on capital market⁷ struc ture, while the GENIUS Act ensures the transfer of value⁸ through stablecoins. None of the U.S. legislative or regulatory initiatives would create a national government-sponsored ledger. regarding the potential adverse impact on mone tary policy transmission effectiveness if financing f lows were to shift at scale to distributed ledgers. If economic activity shifts to private-sector dis tributed ledgers at scale—which some proponents anticipate—the centrality of the central bank in the economy will erode.⁹
• Fully unified ledger: The BIS,¹⁰ the ECB,¹¹ and the People's Bank of China (PBOC)¹² have expressed interest in or explored a unified ledger maintained by a central bank and/or the BIS that retains the role of the central bank and commercial banks at the core of financial flows. Support for such structures depends critically on whether partic ipants trust that the central bank will implement standards to protect individual privacy. The most robust debate so far has focused on issues involv ing digital currencies. However, the trust issues may expand when tokenization includes bank deposits, securities, real estate transactions, and the cross-border trade of goods and services.
• Hybrid ledger: The Bank of England currently is pursuing a hybrid approach. It favors a centralized ledger managed and operated by a private-sector third party in order to avoid the difficult issues associated with potential government access to individual transaction data.

Tokenization implementation for official-sector entities involves critical architectural decisions, including the distinction between on-chain and off-chain processes, the choice between permissioned and permissionless networks, and the underlying blockchain infrastructure (e.g., private versus public blockchains). These archi tectural decisions collectively determine the balance between control, transparency, efficiency, and acces sibility that tokenized assets can achieve, making the selection of appropriate blockchain infrastructure crucial for realizing tokenization's full potential in dif ferent financial contexts.

At the same time, coordination across jurisdictions could not be more critical. Greater coordination sup ports shared learning and lays the groundwork for broader regulatory harmonization and interoperability. The success of tokenization in financial services thus requires clarity and alignment so that policy makers and market participants both can assess the benefits and risks of any given asset tokenization initiative and potential systemic implications. However, architectural decisions reflect core beliefs in each jurisdiction regarding the appropriate balance between public and private inter ests. It may not be possible to reconcile all such issues on a cross-border basis, particularly in the short term. The immediate goal should not be to force a choice among architecture models. Instead, the goal should be to foster a cooperative framework that allows policy makers to deliver interoperability among ledger frameworks in a manner that minimizes domestic risks while respecting the priorities of domestic constituencies.

Footnotes

1. tablecoins are sometimes grouped within this category, insofar as they reference off-chain assets, although many regulatory frameworks treat them as monetary instruments rather than asset tokens. Because stablecoins have been the focus of another Bretton Woods Committee paper, they will be outside the purview of this paper.

2. UBS Media, "UBS AG Launches the World's First Digital Bond That Is Publicly Traded and Settled on Both Blockchain-Based and Traditional Exchanges," press release, November 3, 2022, https://www.ubs.com/global/en/media/display-page-ndp/en-20221103-digital-bond.html.

3. "Introduction to Ribbon Finance," Ribbon Finance, September 27, 2023, https://docs.ribbon.finance/.

4. Sidney Powell, "Maple (MPL): Crypto-Capital Network," Cryptopedia, October 15, 2023, https://www.gemini.com/cryptopedia/maple-finance crypto-mpl-token-maple-token-mpl-crypto.

5. Commodity Futures Trading Commission, "CFTC's Global Markets Advisory Committee Advances 3 Recommendations," press release, March 7, 2024, https://www.cftc.gov/PressRoom/PressReleases/8873-24.

6. Ibid.

7. See the Digital Asset Market Clarity Act of 2025, H.R. 3633, 119th Congress (2025–2026), https://www.congress.gov/bill/119th-congress/house bill/3633.

8. See the GENIUS Act, S. 1582, 119th Congress (2025–2026), https://www.congress.gov/bill/119th-congress/senate-bill/1582.

9. Although proponents argue that a wholesale move to decentralized ledgers is only a matter of time, several publications have explored the nuances of that assertion. See, for example, Raphael Auer, Cyril Monnet, and Hyun Song Shin, "The Economics of Distributed Ledgers and the Limits of Decentralised Money," Center for Economic Policy Research, April 9, 2025, https://cepr.org/voxeu/columns/economics-distributed- ledgers-and-limits-decentralised-money; Raphael Auer, Cyril Monnet, and Hyun Song Shin, "Distributed Ledgers and the Governance of Money," BIS Working Papers No. 924 (Bank for International Settlements, Basel, Switzerland, January 2021), https://www.bis.org/publ/work924.pdf.

10. Blueprint for the Future Monetary System: Improving the Old, Enabling the New," in BIS Annual Economic Report 2023 (Basel, Switzerland: Bank for International Settlements, June 20, 2023), https://www.bis.org/publ/arpdf/ar2023e3.htm.

11. Piero Cipollone, "Towards a Digital Capital Markets Union," keynote speech at Bundesbank Symposium on the Future of Payments, Frankfurt am Main, Germany, October 7, 2024, https://www.ecb.europa.eu/press/key/date/2024/html/ecb.sp241007~cc903db51d.en.html.

12. Heng Wang, "China's Approach to Central Bank Digital Currency: Selectively Reshaping International Financial Order?" Asian Law Review 18, no. 1 (2022): 77–134, https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1090&context=alr.

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Originally published by The Bretton Woods Committee.

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