In truth, you probably don’t own the securities in your custody account. The rights you have (to vote, to receive dividends etc.) are not direct entitlements. Rather, you have a contractual claim to those rights referred to as “beneficial ownership”, mediated through a daisy chain of intermediaries. This system of intermediated securities was not designed by accident, rather it is the outcome of hundreds of years of securities law and infrastructure development.

In the 17th century, investors began using paper-based instruments to confer ownership of property on whoever physically held them.  These were called “bearer” bonds, as ownership would be determined by whoever physically held the paper instrument. Bearer bonds gained particular popularity during the U.S. Civil War, when governments needed fast access to capital and lacked the infrastructure to track individual investors. The appeal was obvious: anonymity, simplicity, and ease of transfer. Naturally, they became a favourite vehicle for money laundering, tax evasion, and various forms of financial skulduggery. Sound familiar?

By the early 1980s, the growth of computing precipitated the move away from physical certificates to electronic book-entry systems for recording entitlements. This was referred to as “dematerialisation”, allowing securities to be recorded and transferred centrally by authorised and well-regulated entities. Today, the overwhelming majority of securities exist solely as dematerialised electronic records. 

But what we gained in operational convenience, we perhaps lost in legal clarity. Ownership has become a more abstract concept, managed through an increasingly intricate web of custodians, registers, and central securities depositories. 

Could tokenisation represent another shift? Once again, we’re exploring forms of ownership where control over the object itself (i.e., the token) can equate to legal title. The difference in this case is that the “bearer” asset is intangible, existing as a string of alphanumeric characters on a decentralised database. It’s a compelling vision, combining perhaps the legal certainty of bearer assets and the operational efficiency of dematerialised securities. 

But we’re not there yet. We’re likely entering a long transition period, where tokenised assets must inevitably coexist with legacy systems, with legal, operational, and technological standards continuing to gradually align. 

That’s why standardisation is so important. If tokenisation is going to live up to its promise, we need a common, open, and extensible framework for representing these assets - not just their economic terms, but their legal characteristics and settlement mechanics.

CDM Tokenized assets working group

As a robust, open standard for modelling financial products and workflows, the CDM is well placed to provide this structured framework. The newly formed CDM Tokenized Assets Working Group was formed to achieve precisely this; to extend the model so that it can capture the full lifecycle of tokenised assets, without disrupting the integrity of its existing framework.

The working group has taken a two-pronged approach, distinguishing between tokenisation at the asset level and at the settlement level. This distinction is deliberate - and important.

Where the token is intended to represent the asset itself - defining ownership, rights, and obligations in a digitally native form - the CDM must evolve to capture the characteristics that make this possible, including the relevant technical standards, underlying DLT networks, and legal frameworks within which the token exists.

By contrast, where the token serves only as a settlement mechanism, the legal and economic nature of the asset remains unchanged. In such cases, the asset itself exists off-chain, and the token is simply the means by which ownership or entitlements are transferred. The blockchain functions here not as the source of legal truth, but as a settlement rail: faster, programmable, and more transparent than traditional infrastructure, but not legally definitive of the asset itself.

To support this in the CDM, enhancements should also focus on capturing new forms of settlement logic that reflect how DLT-based systems operate in practice. These changes are not intended to redefine what a settlement is, but to expand the model’s ability to describe how and when settlement occurs, including mechanisms like atomic delivery, real-time execution, or the conditional settlement logic embedded within a smart contract. 

Tokenisation is not just a new way to issue assets. It’s an opportunity to reimagine how ownership is recorded, how rights are exercised, and how value moves through financial markets. But that opportunity will only be realised if we approach it with discipline and shared purpose. We’ve seen what happens when systems evolve without a common framework: opacity, fragmentation, and inefficiency. This time, we have the chance to do it differently. The CDM offers a path toward coherence; a way to ensure that tokenised assets are not just digitally novel, but legally robust, operationally sound, and interoperable by design. 

That’s the work we’ve begun. And it’s work we invite the entire industry to be part of.

Author: Ciarán McGonagle, Chief Legal & Product Officer, Tokenovate