Issuing a Tokenised or Hybrid Vehicle
Tokenisation changes how a holding is recorded and transferred. It does not change what the holding is.
The situation
The sponsor wants a tokenised instrument, and the reasons vary. Sometimes it is genuinely operational: a register that settles peer-to-peer, fractional holdings below a conventional minimum, programmable distributions, or a holder base that expects to hold assets in a wallet. Sometimes the intended investors are themselves digital-native institutions whose infrastructure is built that way.
The complication is that the same investor base rarely all sits on one side. Part of it wants the token; part of it — the private banks, the institutional allocators, the compliance functions with a policy on the subject — wants the ISIN, and will not accept anything that only exists on a chain. Choosing one form means losing the other half of the demand.
There is also a persistent confusion worth naming early. Tokenising an instrument does not change what the instrument is, what it may hold, who may buy it or how it is regulated. A tokenised security is a security. The token is the record of ownership, not a different asset class, and structures sold on the premise that tokenisation removes a constraint tend to discover the constraint again later.
The vehicle we would recommend, and why
A conventional security issued from a ring-fenced compartment, with a tokenised register alongside the conventional one — a hybrid, rather than a choice between the two.
The workable structure for most sponsors is hybrid. One security is issued from one compartment, carrying one ISIN, settling through standard depositary infrastructure for holders who need that; alongside it, a tokenised register records holdings for investors who want on-chain settlement. Both records refer to the same instrument and the same underlying assets, with a defined mechanism for moving a holding between forms.
That arrangement satisfies both halves of the investor base without issuing two products. A private bank receives the security into a custody account against payment and never encounters a token. A digital-native holder holds it on-chain. The compartment, the underlying assets, the valuation and the terms are identical for both.
The reconciliation is where the structuring effort goes, and it should not be underestimated: the two registers must never disagree about who owns what. That means a defined authoritative record, a documented process for transferring between forms, and controls that prevent the same holding existing twice. Switzerland's framework for register-based uncertificated securities is the reason this is more straightforward there than in most jurisdictions.
Transfer restrictions need particular attention. A conventional register enforces eligibility at the point of transfer because a human is involved; a token can move to any address unless the instrument enforces restrictions itself. A professional-investor security requires whitelisting or an equivalent control built into the token, and that has to be designed rather than assumed.
Jurisdiction logic
Switzerland is the clearest fit. Its legal framework for register-based uncertificated securities gives a tokenised register direct statutory recognition, which means the token can be the record of title rather than a representation of a record held elsewhere. That is a materially simpler structure than the alternative.
An EU-settled compartment works where European institutional distribution matters more than the tokenisation itself, with the token operating alongside the conventional register rather than as the primary record. Frameworks here are evolving, and the structure should be designed so it does not depend on a rule that is still moving.
The offshore route appears where the sponsor's counterparties and the target investors are already outside Europe. In every case, the honest question is what the tokenisation is actually for: if the answer is that investors expect it rather than that it solves something, a conventional instrument reaches them sooner and with fewer moving parts.
Timeline
What the weeks look like
- Weeks 1–2
Mandate and vehicle selection
Establish what the tokenisation is for, which investors need which form, and whether a hybrid or a single form is warranted.
- Weeks 2–4
Jurisdiction and structure
Select the jurisdiction against the recognition framework, and design the register architecture, the transfer mechanism and the eligibility controls.
- Weeks 3–8
Documentation and approvals
Terms drafted covering both forms; register and transfer processes documented; technical arrangements reviewed; onboarding completed.
- Weeks 6–10
ISIN, settlement and custody onboarding
ISIN allocated and settlement eligibility obtained for the conventional form; the tokenised register deployed and tested against it.
- Weeks 8–12
Launch and first subscription
Security issued, opening valuation struck, and holdings recorded in whichever form each investor requires.
Typically eight to twelve weeks — longer than a conventional certificate, and the additional time is register architecture and reconciliation design rather than drafting. A conventional-only product remains a four to eight week exercise.
What you need to bring
The five things that decide whether the timeline holds
A clear reason for tokenising
What it must enable that a conventional register cannot. If the honest answer is investor expectation, that is worth knowing before the extra complexity is committed to.
The investor split
Which holders need conventional custody and which need on-chain settlement, since that decides whether a hybrid is necessary at all.
The technical arrangements
Which chain and which register technology, or a willingness to use arrangements already in place, together with the controls governing them.
The eligibility rules
Who may hold the instrument, and how that is enforced on-chain — whitelisting or an equivalent, designed rather than retrofitted.
Onboarding documentation
KYC and AML on the sponsor and its principals, and the process by which each token holder is verified before a holding can be recorded to them.
The useful question is never whether an instrument can be tokenised. It is what the tokenisation is for — and whether the investors who matter most need the token or the ISIN.
Frequently asked questions
Is a tokenised security regulated differently from a conventional one?
In substance, no. A tokenised security is a security: the same rules on who may buy it, how it may be marketed and what disclosure is required apply regardless of how ownership is recorded. What differs by jurisdiction is whether the tokenised register is recognised as the register of title, which is a question of legal form rather than of regulatory treatment. Structures premised on tokenisation escaping a restriction generally meet that restriction again at distribution.
Can the same instrument exist in both conventional and tokenised form?
Yes — that is the hybrid arrangement, and for most sponsors it is the right one. One security, one ISIN, one set of terms, with two registers recording holdings and a defined process for moving a holding between them. The design requirement is that the two can never disagree about who owns what, which means a documented authoritative record and controls that prevent a holding existing in both forms at once.
Will a private bank hold the tokenised form?
Generally not today, which is precisely why the hybrid exists. Conventional custodians receive the conventional form through the settlement infrastructure they already use and are not asked to develop a capability they do not have. The tokenised form serves holders whose own infrastructure supports it. Assuming an institutional allocator will accept a token-only instrument is the most common way these projects stall at the distribution stage.
Does tokenisation make an illiquid asset liquid?
No. Liquidity comes from buyers, not from the record of ownership. Tokenisation can lower the friction of a transfer and allow smaller fractions, which helps at the margin, but a token over an illiquid underlying is an illiquid token. Where a secondary market does emerge for such instruments it is because someone is willing to make one — the same reason it emerges for a conventional security.
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