A type of digital twin token (DTT) that represents an underlying security or financial instruments issued on a different platform (such as a traditional CSD or registrar), where such representation itself meetings the applicable definition of a security/ financial instrument under relevant laws.

By nature, a tokenized security is a financial digital asset that is a virtual representation of a financial asset (a security). In the context of cryptocurrency and the broad category of digital assets, digital twins include tokens that represent financial assets such as stocks, bonds, and similar securities, but are traded via a tamper-proof and decentralized blockchain network, providing for higher levels of efficiency, transparency and cost savings compared to traditional issues.

A tokenized security (also known as a security token) is a coupon (token) that represents and confers rights of ownership over a virtual security. For example, an investor may buy tokenized shares that carry the same rights of the original shares listed on a regulated market.  However, tokenized shares do only exist in digital form, thanks to the underlying technology of the tokenized security structure, i.e., the blockchain.

These tokens are not considered securities in the real sense (as opposed to the original financial securities). However, if the security token classifies as a transferable security/ financial instrument within the definition of a regulatory authority, then it would be treated as such and will be subject to certain regulatory laws.

For example, tokenized securities may be treated as financial securities in the case that such virtual assets grant a right to capital shares (or shares) in an issuer’s company with the right to receive dividends or with a claim on a share in the earnings or income of the issuer with or without the participation right in its management.