Tokenisation: the approaching revolution for funds

An original version of this article was first published in Aurigny En Voyage, October 2025.

What is tokenisation?

Tokenisation is the digital representation of traditional, real-world assets ("RWAs") – such as bonds, equities, real estate and funds – in computer code stored on a decentralised ledger (a "blockchain").

Tokenisation makes the leap to decentralisation of data, where no-one "holds" the data. The blockchain becomes a single store of information, where service providers access and manipulate the data, rather than holding it on their servers.

We think the best way to describe tokens is: "a new way of storing data, with significant technological advantages".

Permissioned tokens

"Permissioned" tokens are the key to mainstream adoption. They can only be sent or received based on verified credentials of the digital "wallets" to which the tokens are credited (Bitcoin, by contrast, can be sent to or from any wallet). This facilitates the application of mainstream compliance requirements on tokens.

For example, a token can be programmed so that it cannot be transferred to a digital wallet unless the investor's wallet satisfies specified AML requirements. In practice, a Guernsey administrator will determine whether the investor has satisfied those criteria, designate their wallet accordingly and thereby permit a transfer of the token to that wallet.

The principal benefits of tokenisation

We think the benefits of tokenisation and the "smart contracts" they can run ("smart contracts" is just another name for computer code) will be:

• Efficiency. The blockchain will be a single source of data, eliminating the need for duplicative, labour intensive and error strewn data inputting.
• Risk. The potential for instant settlement (transferring a token from one wallet to another in seconds, not days) means the elimination of counterparty risk, with less need for central counterparties and reduced collateral requirements.
• Automation. Processes currently requiring manual input will become fully automated. A classic example is capital calls sent to investors. A single data input could be made by the administrator for a drawdown amount, which gets automatically allocated to investors pro rata to their holding of tokens, deducted from their wallets and transferred to the fund's wallet – all in seconds (think of it as a very clever direct debit). The recent GENIUS Act in the US, which creates a federal regulatory framework for stablecoins (cryptocurrencies backed by stable assets like the U.S. dollar) will help legitimise the use of blockchain based payments.
• New pools of capital. The ability to "fractionalise" the tokens (break them down into smaller and smaller pieces) means smaller investment sizes, which means new investors (e.g. HNWIs and mass affluent) can access products hitherto reserved for only the most sophisticated institutions. "Feeder" funds specifically set up for such investors, with standardised investment terms, could invest into the main fund.
• Liquidity. Technology platforms – like those offered by TISE – facilitate token trading via electronic order books: an essential feature for smaller investors typically unable to hold otherwise illiquid investments for many years.

How is Guernsey placed?

Given its large funds industry and its legal and regulatory environment, Guernsey is ideally placed to benefit from tokenisation.

Our Lending, Credit and Finance Law makes clear that tokens representing RWAs are not "virtual assets" and therefore regulated in the same manner as the RWAs they represent.

Our Electronic Transactions Law and Electronic Transactions Ordinance facilitate the use of electronic documents and processes, the storage of information in electronic form and the enforceability of a contract carried out by means of an "electronic agent".

When will this happen?

It's already started! Headline grabbing examples – such as the Dubai Land Department's announcement that it had fully funded a tokenised a £0.5m property project in one minute and 58 seconds, attracting 149 investors from 35 nationalities – demonstrate the huge appetite among investors familiar with the technology.

Traditional managers are catching up, issuing an increasing number of tokenised versions of their products. There is no doubt that this area will grow exponentially in the coming years.

Matt Brehaut and Tom Carey are partners in Carey Olsen's corporate team in Guernsey. They specialise in the establishment of Guernsey domiciled funds, and lead the firm's digital assets team in Guernsey, working with clients to explore ways in which the island can remain at the forefront of new technologies such as tokenisation.