Blockchain-Recorded Securities: Risks and Rights in Tokenized Stocks

Tokenized stocks are securities recorded partially or wholly on a blockchain using a crypto asset. These tokens represent a claim on shares held by an intermediary, direct share ownership, or synthetic exposure to a share price.

The product structure determines the holder's obligations and whether they can exchange tokens for ordinary shares. The U.S. Securities and Exchange Commission separates issuer-sponsored tokens from third-party tokenizations.

Native blockchain shares are issued directly on a blockchain, while custodial or wrapped tokens are backed by shares held by an intermediary. Synthetic instruments follow a stock's price without necessarily giving the holder ownership of the underlying stock.