Tokenisation Legal Support

We believe that tokenisation will really shake things up in the near future, and we closely watch all the latest developments and frameworks that are enabling this process to become more efficient and secure. 

The Challenges of the Tokenisation Industry 

As the matter of fact, only a few countries have yet developed legal frameworks for tokenisation, which means that ‘on-chain’ operations with tokenised assets might still be non-binding and need to be mirrored ‘off-chain’ to have legal force and effect. 

For example, in order to transfer tokenised equity, a person, in addition to the ‘on-chain’ transfer of token, might need to sign a regular equity purchase agreement, apply for the registration of such transfer with the state registrar, or even visit a notary in person.  

Another issue faced by the tokeniser is how to legally tie the issued token to the underlying asset, as well as how to ensure the legal and physical security of the tokenised asset itself. 

Given the above, we believe that truly reliable tokenisation will remain unattainable unless the tokeniser has chosen an appropriate jurisdiction, legal framework and is receiving comprehensive legal advice.

Complex Legal Advice and Support for the Tokenisation

The aforementioned scenario is precisely why projects should approach tokenisation carefully. At AURUM, we are convinced that the tokenisation procedure must always start with the legal analysis of the underlying asset and project structuring, which, if done correctly, will allow the issuer to mitigate most of the security risks and keep most, if not all, operations ‘on-chain.’ 

The desired outcome may be achieved through the preparation of comprehensive legal documents to support the tokenisation procedure, as well as through structuring the project in jurisdictions that provide for efficient tokenisation frameworks. We further help the client to involve appropriate technical solution providers and financial intermediaries (e.g., broker-dealers) if required, and establish procedures for managing the life-cycle of the security token and the underlying asset.

Tokenisation Use-Cases

Tokenisation is not yet popular for all types of assets, but the list of use-cases is constantly growing. As of today, the following asset classes can be tokenised most effectively:

Equity, stock, sharesReal estate
Profit participation notesIntellectual property rights
Depositary receiptsCommodities
DerivativesPrecious metals
Convertible loans and instrumentsMedia content, books, films, pieces of art