Every term this field uses, defined so that it makes sense before you know the term. Search it, filter it by category, or read it as a dictionary.
Letting an account be controlled by contract logic rather than a single key, enabling recovery, spending policies and sponsored fees.
An investor meeting wealth, income or expertise criteria and therefore eligible for offerings not available to the public. The thresholds and the evidence differ by jurisdiction.
An identifier held by software rather than a person, with its own keys. The governing question is what it is answerable to: a human or institution that delegated it and remains accountable, or a hardware root standing in their place.
Bringing about a transaction in an investment without being a principal. A regulated activity in its own right, which a venue can perform without intending to.
Under MiCA, a crypto-asset referencing several currencies, commodities or assets rather than a single currency. Carries heavier requirements than an e-money token.
Two or more transfers that succeed or fail as one indivisible operation. Straightforward within a ledger and the central difficulty across ledgers.
SeeDelivery versus paymentHashed timelock contract
A statement by an accountant or auditor about reserves at a point in time. Weaker than an audit, and it inherits exactly the credibility of whoever signed it.
Determining which customer an incoming transfer belongs to. On public ledgers, solved with a per-customer address or a shared address plus a reference, and a reconciliation problem when it fails.
An agent with no human controller, anchored instead by hardware. Only the strongest class of hardware root — per-unit secrets such as a TPM endorsement key — is accepted as an anchor for one.
The property that a vehicle's assets are not drawn into the insolvency of its sponsor or parent. Most of the cost of structuring is buying this, and it is undermined by operating the vehicle as a division of the sponsor.
The natural person who ultimately owns or controls a company, typically above a 25% threshold though it varies. Identifying them is the point of most corporate onboarding.
A ledger of batched transactions, each batch linked to the previous by a hash so that history cannot be altered without redoing the work after it.
A mechanism moving a representation of an asset between ledgers, either by locking and minting or by burning and reissuing. Historically the most exploited component in the field.
A firm authorised to deal in securities for its own account or arrange deals for others. Introducing a tokenized offering to investors generally requires this permission or an exemption.
Destroying units on one network and creating them on another. No custodian is required, and the total is wrong in the interval between the two events.
A direct liability of a central bank in digital form. Wholesale variants for interbank settlement are considerably further advanced than retail ones.
The institution holding securities in book-entry form and operating settlement for a market. Tokenized issuance either integrates with one or has to replicate what it does.
The unbroken sequence of legal steps connecting a real asset to the holder of an interest in it. A token sits at the top of this chain and derives all of its meaning from the links below.
The issuer's ability to move or burn tokens from a holder without their signature — for court orders, sanctions or error correction. A custody-like power that must be disclosed.
How quickly collateral can be moved to where it is needed. The clearest institutional argument for tokenization, because intraday movement changes how much collateral is needed at all.
Mixing client assets with the firm's own, or with each other in a way that makes individual entitlements unprovable. Generally prohibited, and the fact pattern behind most custodial failures.
A segregated pool within a securitisation vehicle, most commonly a Luxembourg securitisation company. Each compartment answers only for its own liabilities.
Executing code in a hardware-isolated environment so that neither the operator nor the host can read the data being processed, with a remote attestation proving which code ran.
A transfer whose amount is encrypted, visible only to the parties and any designated auditor. Available on Solana's Token-2022 and proposed for XRPL.
SeeToken-2022Zero-knowledge proofSubtransaction privacy
The process by which participants agree the order and validity of transactions. Its design determines finality, cost and who can censor.
A bank using another bank's accounts to reach a country where it has no presence. Each hop re-screens the parties, which is where cross-border cost and delay actually come from.
A specific payment route between two markets, defined by currencies and permitted customer types. Coverage, not technology, is usually the binding constraint on a design.
A transfer where payer and beneficiary hold accounts in different jurisdictions. Always a sequence of transfers between institutions, each of which must be permitted to act.
A firm authorised under MiCA to provide named services — custody, exchange, operating a trading platform, transfer, advice. Authorisation is per service and passports across the EU.
Holding an asset for someone else. The practical test is whether the firm can move it without the owner's authorisation; if it can, it has custody, whatever the product is called.
The set of checks a regulated firm performs to understand a customer and the purpose of the relationship, applied more intensively where risk is higher.
The contract language used on Canton, in which rights and obligations are modelled explicitly along with who is entitled to see each part.
SeeCanton NetworkSubtransaction privacySmart contract
A bank withdrawing service from a country, sector or customer type because supervising the risk is not worth the return. The effect is not higher prices but the absence of a route.
An identifier resolvable to a document listing keys and services, without depending on a central registry. Often the subject of a verifiable credential.
SeeVerifiable credentialONCHAINID
An agent acting under a named controller, with an explicit scope — spending limits, permitted operations, permitted protocols. Revoking the controller cascades to everything below it.
The regulatory framing that tokenization changes how an instrument is recorded and settled, not what it is. If it was a security before, it remains one.
Settling so that the asset transfers if and only if the cash does, removing the risk that one side performs and the other does not.
Eliminating physical certificates so the electronic record is the security itself. The step tokenization extends rather than invents.
A stablecoin trading away from its reference. Usually a liquidity or confidence event rather than a statement about the reserve, though the two are hard to distinguish in the moment.
Finality reached at a defined point by the consensus protocol, so a committed block cannot be reverted without a protocol violation. Preferred where legal finality must be identified.
Proof that the holder of a private key authorised a specific message, verifiable by anyone with the public key and invalid if the message changes.
A record maintained across multiple parties without one of them being definitive. The regulatory term of art, preferred over blockchain because it does not presume a specific data structure.
An EU regime permitting market infrastructures to trade and settle DLT-based financial instruments under temporary exemptions, so the rules can be tested against real activity.
Under MiCA, a crypto-asset referencing a single official currency. Issuance is restricted to authorised credit or electronic money institutions, with redemption at par at any time.
A firm authorised to issue electronic money and hold customer funds, subject to safeguarding rules. The permission behind most accounts that receive ordinary domestic transfers.
Whether a specific person may lawfully hold a specific instrument. A fact about people rather than about addresses, which is why it cannot be established by a token alone.
SeeTransfer restrictionPortable eligibilityVerifiable credential
Deeper investigation for higher-risk relationships — politically exposed persons, high-risk jurisdictions, unusual structures — including source of funds and senior sign-off.
The execution environment of Ethereum, reimplemented by many other chains so that the same contracts and tooling work across all of them.
The intergovernmental body that sets anti-money-laundering standards. Not a legislature, but its recommendations are implemented into national law almost everywhere.
Blocking transfers for a specific holder or an entire asset. Usually a protocol-level control on regulated-asset standards, and a capability supervisors expect to exist.
A token whose units are interchangeable, so holding any unit is equivalent to holding any other. The default form for currencies, fund units and most tokenized debt.
The fee paid for execution, denominated in the network's own unit. Denominated differently from the asset being moved, which is why the two should never be added together.
US federal legislation for payment stablecoins, Public Law 119-27, setting who may issue and what must back them. Issuers above $10bn in outstanding tokens require a federal licence from the OCC.
A per-device secret or identifier a claim can be tied to, so a reading is bound to the machine that produced it. Graded by strength: per-unit secrets, per-unit readable identifiers, and design-level identifiers that are not unit-specific.
A tamper-resistant device that generates and uses keys without exposing them. The traditional answer to key protection, and still the baseline institutional custodians are measured against.
A fixed-length fingerprint of data. Any change produces a different fingerprint, which is what lets a ledger prove its history has not been edited.
Foreign-exchange settlement risk arising from time-zone differences, named after the 1974 failure of Bankhaus Herstatt mid-settlement.
The US test asking whether there is an investment of money in a common enterprise with an expectation of profits from the efforts of others. What the arrangement does decides it, not what it is called.
Placing physical certificates with a depository so ownership transfers by book entry rather than delivery. The precedent tokenization is repeating with different plumbing.
A deterministic way of serialising JSON so the same data always produces identical bytes, which is what makes a signature over a JSON document verifiable by someone else.
Customer due diligence applied to a company: incorporation documents, ownership above a threshold, directors, and the nature of the business. Usually the longest step in getting a corridor live.
Verifying who a customer is and, for a business, who ultimately owns and controls it, before providing a regulated service. Performed by the regulated institution, not by software.
A deposit address where any arriving balance is automatically converted and paid out under a standing instruction, rather than held. Removes a custody step from a payment flow.
The contract or custodian holding an original asset while a representation circulates elsewhere. Counting both without netting the lockbox is the classic double-count.
A reference included with a transfer to a shared address so the recipient can attribute it. Omitting it is the most common cause of unattributable deposits.
SeeAttribution
A tree of hashes allowing proof that one item belongs to a large set without revealing or transmitting the rest. The basis of most inclusion proofs.
The EU's single rulebook for crypto-assets, fully applicable from 30 December 2024 with a final transitional deadline of 1 July 2026. Covers ARTs, EMTs and the authorisation of service providers.
SeeCrypto-asset service providerE-money tokenAsset-referenced token
Recording which model and which weights produced an output, so that a later claim can be checked. Changing either makes the result a different claim rather than the same one refreshed.
The US state-level licensed category for moving value on behalf of others. Licensing is per state, which is why US payment coverage is built up rather than granted at once.
Splitting a private key into shares held by different parties, so that signing requires a threshold of them and the whole key never exists in one place.
An on-chain arrangement requiring several signatures to authorise a transaction. Visible on the ledger, unlike a threshold signature, which can be an advantage or a privacy cost.
The per-unit value of a fund's assets less liabilities. Tokenized funds raise the question of how often it is struck and who is permitted to publish it on-chain.
A token whose units are individually distinguishable, each with its own identifier and metadata. Used where the thing represented is unique, such as a specific title deed or serial-numbered item.
An account a bank holds with a foreign bank in that country's currency. Pre-funding these accounts is the working capital cost that stablecoin settlement is often aimed at.
One account at a custodian holding the assets of many clients, with the entitlements tracked in the intermediary's own books. Efficient, and only as sound as those books.
Converting local currency into a ledger-native instrument and back. Each direction is a regulated activity performed by a licensed institution in that market.
A service publishing off-chain facts on-chain — prices, rates, NAV, events. The point at which a self-consistent ledger becomes dependent on someone's assertion.
An SPV whose equity is held by a trustee for charitable or nominal purposes rather than by the sponsor, so that it is not consolidated onto the sponsor's balance sheet.
A subdivision of a token's supply carrying its own rights, restrictions or lock-up. The mechanism by which one contract can represent several share classes.
SeeTrancheERC-1400ERC-7518
A key pair held in a device's secure hardware and used with biometric or PIN consent. Gives non-custodial control without a seed phrase to lose.
Using an authorisation granted in one member state to operate across a bloc. Available within the EU under MiCA; it has no general equivalent elsewhere.
A firm authorised to execute payment transactions without taking deposits or issuing e-money. Lighter than a bank licence and correspondingly narrower in what it permits.
A stablecoin used for payment and settlement rather than trading, and the category most stablecoin legislation is written around, including the US GENIUS Act.
The foreign-exchange equivalent of DvP: both currency legs settle together or neither does. Addresses the risk of paying out one currency and not receiving the other.
The steps that make a security interest effective against third parties — filing, registration, possession or control, depending on the asset and the jurisdiction. An unperfected interest may lose to a later claimant.
SeeCollateralChain of title
A ledger where participation is restricted to identified parties. Common for regulated assets because it makes the participants supervisable and the data confidential.
SeePermissionlessCanton NetworkSubtransaction privacy
A ledger anyone may join, read and transact on without approval. Maximises availability and auditability and removes the possibility of restricting participation at the network layer.
A licensed intermediary that introduces an offering to investors and is remunerated for it. The party most tokenization platforms must partner with rather than replace.
Someone entrusted with a prominent public function, along with their close associates and family. Not a prohibition, but a trigger for enhanced scrutiny.
Carrying proof that a holder meets a test from one institution to another without re-collecting the underlying documents. Widely wanted, not yet solved, and a gating problem for secondary trading.
Algorithms believed secure against quantum computers. Relevant to long-dated tokenized instruments, whose signatures must remain sound for the life of the asset.
Holding balances in destination markets ahead of demand so payouts can be made immediately. Ties up capital and is a large part of what cross-border providers charge for.
SeeNostro accountLiquidity
The risk of delivering value and not receiving the other side. The specific exposure DvP and PvP exist to eliminate.
The secret that authorises transfers from an address. Whoever holds it controls the asset, which is why custody is defined by who can use it rather than by who claims ownership.
An offering made to a limited set of qualifying investors under an exemption from public-offer requirements. The route most tokenized issuance actually takes.
Finality that strengthens with each confirmation but is never absolute, characteristic of proof-of-work chains. Institutions generally require a stated confirmation depth.
Evidence that a custodian or issuer holds the assets it claims. Meaningful only when paired with proof of liabilities; assets alone say nothing about whether they cover what is owed.
Consensus in which the right to propose and attest blocks is weighted by economic stake, with misbehaviour penalised by slashing that stake.
The disclosure document required for a public offering, reviewed by a regulator in most regimes. Avoiding the requirement is the main reason offerings are structured privately.
A single legal entity divided into cells whose assets and liabilities are segregated from each other by statute. Common in Guernsey, Jersey, Malta and Mauritius for multi-asset tokenization programmes.
The publicly shareable counterpart of a private key, from which an address is derived and against which signatures are verified.
A custodian meeting a regulator's specific criteria for holding client assets, typically a bank, trust company or specifically authorised firm. Some fund and adviser rules require one.
An asset that exists and has value independently of any ledger — property, receivables, commodities, fund units, private credit. Tokenizing it creates a representation, not a new asset.
Confirming that two records of the same activity agree. Where a ledger mirrors an off-chain register rather than replacing it, this never goes away.
The holder's right to redeem one token for one unit of the referenced currency, without fees that make the right illusory. The feature that distinguishes a payment stablecoin from a fund unit.
The authoritative record of who holds an instrument. Whether a ledger may be the register, rather than a copy of one, is decided by the law where the issuer is incorporated.
The equivalent of a transfer agent outside the United States, keeping the holder register on behalf of an issuer.
A supervised environment in which a firm may operate with modified requirements for a limited period. Useful for proving a model and not a substitute for authorisation.
One regulated firm accepting another's customer due diligence. Permitted narrowly in most regimes, and limited in practice because liability usually stays with the relying firm.
The assets held to back tokens in issue. Quality, liquidity, segregation and audit are the regulated variables; the quantity alone tells you very little.
Legally separating a pool of assets so that claims against one pool cannot reach another. Used within a single vehicle to keep series or compartments independent.
The payments equivalent of segregation: client funds held at a separate credit institution or covered by insurance, so they survive the failure of the payment firm.
Legal prohibitions on dealing with named persons, entities, sectors or territories. They apply to the firm regardless of what any counterparty asserts, and breach is generally strict liability.
Checking parties against sanctions lists, watchlists and adverse media, at onboarding and continuously thereafter. A list changing is an event the firm is expected to notice.
Trading between holders after issuance. Most tokenized interests cannot lawfully trade on an open venue, which is why so many are issued and then sit.
Converting a pool of cash-generating assets into transferable securities issued by a vehicle that holds the pool. Tokenization changes how the resulting security is recorded, not what it is.
A token representing an instrument that meets the legal definition of a security in the relevant jurisdiction. The definition is local, so the same token can be a security in one country and not in another.
SeeHowey testTransfer restrictionERC-3643
A trustee holding the security interest over a vehicle's assets on behalf of all holders, so that enforcement is collective rather than a race between individual creditors.
SeeTrusteeCollateral
An account at the custodian in the name of, or clearly designated for, a single client. More costly than omnibus and much easier to unwind in an insolvency.
Keeping client assets separate from the firm's own so that they are identifiable and returnable if the firm fails. The single most consequential rule in custody and payments.
The holder alone controls the keys, so no intermediary can move the asset. Removes custodial risk and licensing questions, and makes key loss unrecoverable.
A token type carrying several classes in one contract, where units within a class are interchangeable but classes are not. Maps naturally onto share classes and tranches.
SeePartitionERC-1155ERC-7518
A US limited liability company that can create internal series, each with its own assets and members. Cheaper than forming an entity per asset, but recognition outside the forming state is not uniform.
The discharge of an obligation by final transfer of the asset or the cash. Distinct from the trade, which is the agreement, and from clearing, which prepares settlement.
The point beyond which a transfer cannot be reversed, including by an insolvency office-holder. A legal concept that a ledger's probabilistic confirmation does not by itself supply.
SeeSettlementFinalityProbabilistic finality
Confiscating part of a validator's stake for provable misbehaviour such as double-signing. The economic mechanism that makes attacking a proof-of-stake chain expensive.
Code deployed to a ledger that executes deterministically when called. Not a contract in the legal sense; whether it evidences one depends on the arrangement around it.
The dominant language for EVM contracts. Its ubiquity is the main reason EVM compatibility is a decisive feature for a new chain.
A company, trust or fund formed to hold one asset and as little else as possible. It gives the asset a legal owner that can contract, be audited and be wound up independently of its sponsor.
A token intended to hold a stable value against a reference, usually a currency. Regulation turns on who may issue it, what backs it, and whether holders can redeem at par.
Each party to a transaction sees only the part concerning them, rather than the whole. The design point of Canton, and what makes a shared ledger tolerable between competitors.
SeeCanton NetworkPermissioned ledgerConfidential transfer
Divergence between the units that exist across networks and what is actually backed, caused by double-counted bridges, asymmetric issuance and redemption, or unauthorised contracts.
A confidential report to a financial intelligence unit about activity a firm suspects relates to crime. Filing it is mandatory; telling the customer is generally an offence.
A signature produced jointly by a quorum of key-share holders that verifies as a single ordinary signature on-chain, revealing nothing about the quorum.
Recording an interest in an asset as a transferable entry on a distributed ledger. Supervisors generally describe it as a delivery method rather than a new asset class, which is why existing obligations continue to apply.
A commercial bank deposit recorded on a distributed ledger, remaining a claim on the issuing bank and inside the regulatory perimeter that deposits already occupy.
Units in a money market fund recorded on a ledger, increasingly used as collateral because it can move at the speed of the trade it is supporting.
A class of securities issued by the same vehicle with a distinct priority of payment. Senior tranches are paid before junior ones and carry correspondingly lower risk and return.
Ongoing review of activity against expected behaviour to surface what should be reported. Obligation of the licensed institution, and unchanged by the settlement medium.
The party maintaining the register for a registered security and processing transfers. A licensed role in several regimes, and the one a ledger most directly competes with.
A rule limiting who may hold or receive an instrument — accreditation, residence, lock-up, holder count. Encoding it in the token is one of the genuine advantages of the format.
SeeWhitelistERC-3643Eligibility
The requirement that originator and beneficiary information accompanies a transfer between regulated institutions. Public ledgers do not carry it natively, so it travels alongside.
A chip holding a per-device key that cannot be exported, used to prove a message came from a specific machine running specific software.
A party holding legal title to assets for the benefit of others under a trust deed, with duties owed to those beneficiaries. In many structures the trustee, not the issuer, is the one that can enforce.
SeeCustodianSecurity trustee
A token whose stated purpose is access to a service rather than a claim on an issuer's performance. The label does not decide the classification; conduct and economics do.
A participant that proposes or attests to blocks. In permissioned networks validators are known and contractually bound, which is what makes them acceptable to supervised institutions.
A tamper-evident, cryptographically signed statement by an issuer about a subject, presentable without contacting the issuer. The shape most portable-eligibility designs take.
SeeDecentralised identifierPortable eligibilityZero-knowledge proof
Account details issued to a customer that route into an institution's underlying account, letting each customer receive ordinary domestic transfers with attribution.
The FATF term for a business conducting crypto-asset activities on behalf of others. The hook through which anti-money-laundering obligations, including the travel rule, attach.
The execution environment a ledger runs contracts in — EVM on Ethereum and its compatible chains, SVM on Solana, Move on Aptos and Sui. Determines the language and tooling available.
The contractual order in which cash from a pool is applied — fees, senior interest, senior principal, then junior claims. Encoding it in a contract is one of the clearer wins of tokenization.
The set of addresses permitted to receive an instrument. Simple and effective, and it degrades into an administrative burden as holder numbers grow.
SeeTransfer restrictionTransfer hook
A token on one network representing an asset locked on another. Its value depends entirely on the custodian or contract holding the original, which is a credit question rather than a technical one.
A proof that a statement is true revealing nothing else. Useful for proving eligibility — over a threshold, resident in a permitted country — without disclosing the underlying facts.
SeeVerifiable credentialPortable eligibilityConfidential transfer
Regaining control of a self-custodied account through a quorum of nominated guardians rather than a seed phrase, usually with a delay in which the owner can cancel.
SeeSelf-custodyAccount abstraction