Security Tokens

Security tokens are digital representations of ownership interests in underlying assets that qualify as securities under financial law. Unlike utility tokens, which provide access to a product or service, security tokens are backed by tangible or intangible assets like equity, debt, or revenue-sharing rights.

They are issued on blockchain networks, allowing for programmable compliance, automated dividend distributions, and increased liquidity through global trading venues. By utilizing smart contracts, security tokens can enforce transfer restrictions and know-your-customer requirements at the protocol level.

This innovation enables fractional ownership of high-value assets such as real estate or private equity, making them accessible to a broader range of investors. However, they are subject to strict regulatory requirements, including registration, disclosure, and secondary market trading limitations.

They bridge the gap between traditional capital markets and decentralized finance infrastructure. Their design must balance efficiency with rigorous adherence to securities laws across multiple jurisdictions.