Worldwide transfer volume for tokenized stocks has now reached $29.5 billion. However, holding stock-labeled tokens in a crypto wallet does not automatically grant investors an actual ownership stake in a company.
Tessera PE founder Chan Ahn explained that products marketed as “tokenized stocks” actually operate under one of three distinct legal structures: issuer-sponsored, custodial, and synthetic. “The marketing language is almost identical across these three types, but the legal substance is vastly different,” Ahn said.
Three Distinct Legal Structures
Under the first structure, issuer-sponsored, token holders on paper possess voting rights and dividends equivalent to regular shareholders. But there is a strict requirement: these rights are only recognized if the investor’s name is directly recorded in the official shareholder registry, rather than represented through a nominee.
The second model is custodial. The underlying shares remain off-chain and are held by an intermediary entity. Investors only receive voting rights or dividend distributions once forwarded by a third party, with Broadridge serving as an example of a player facilitating this role.
The third structure, synthetic, places investors at the greatest distance from the underlying asset. Token holders in this category hold purely a contract with the product issuer, with neither physical shares nor direct claims on the company’s equity. The SEC has warned that some synthetic products could be classified as security-based swaps.
What Happens If the Intermediary Goes Bankrupt?
In the custodial model, substantial risk concentrates with the intermediary. If the custodian institution holding the underlying shares goes bankrupt, token holders cannot demand their rights directly from the issuing company. Investors must join the intermediary’s bankruptcy proceedings to pursue their recovery claims.
Tessera, the company founded by Ahn, chose to issue tokenized loan participation rights. This loan participation-based instrument is purely a debt product, not equity. This structural decision ensures Tessera’s product carries neither voting rights nor dividend distributions for holders.
A Quick Test Before Buying
Marketing language often blurs the lines between these three structures. To determine your actual ownership, apply a quick test: identify which entity owes you voting or dividend rights, and examine the legal scenario that applies if that guarantor entity defaults. The answers to these two questions will clarify your position as an investor.
Reported by crypto.news.
Read also: What Is DeFi (Decentralized Finance)?
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
