Tokenization glossary: MiCA, MiFID II and digital asset terms defined

Representing ownership of an asset as a transferable record on a distributed ledger, so the ledger becomes the register of holders. Tokenization does not change what the asset is: a tokenized bond remains a bond, and the law that applied before applies after. What changes is how title moves and how quickly it settles.

An asset that exists off-chain and derives its value there: a bond, a fund unit, a loan, real estate, a commodity or a receivable. Tokenizing it creates an on-chain record of an off-chain claim. The enforceability of that claim comes from contract and applicable law, not from the ledger.

A token that qualifies as a transferable security or another financial instrument. In the EU that classification places it under MiFID II rather than MiCA, and its issuance, placement and trading require the corresponding investment-services authorisations. Substance governs: calling a token a utility does not remove it from the securities perimeter.

A collective investment vehicle whose units or shares are issued and transferred as tokens. The fund's legal form, its manager's authorisation and its investor-protection obligations are unchanged. The register moves on-chain, which shortens subscription and redemption cycles and makes the holder list continuously reconcilable.

A tokenized fund or note whose underlying holdings are short-dated government debt, typically US Treasury bills or EU sovereign paper. It functions as an on-chain cash-equivalent instrument. Yield derives from the underlying securities, and holders hold a claim on the vehicle rather than on the sovereign directly.

Regulation (EU) 2023/1114 on Markets in Crypto-Assets, in application across the Union since 2024. It creates a single authorisation regime for crypto-asset service providers and for issuers of asset-referenced and e-money tokens. It expressly does not cover crypto-assets that qualify as financial instruments, which remain under MiFID II.

An entity authorised under MiCA to provide services such as custody, exchange, order execution, placement, transfer or advice on crypto-assets. Authorisation in one member state passports across the EEA. Firms holding pre-MiCA national registrations must obtain CASP authorisation to continue providing in-scope services.

MiCA's category for a crypto-asset that references several currencies, assets or a basket of them in order to stabilise its value. Issuers face reserve, governance, disclosure and own-funds requirements, and asset-referenced tokens deemed significant are supervised at EU level by the European Banking Authority.

MiCA's category for a crypto-asset referencing a single official currency, functionally a digital form of electronic money. Issuers must be authorised credit institutions or electronic money institutions, must hold full backing in low-risk liquid reserves, and must redeem at par on demand at any time.

Directive 2014/65/EU, the EU framework governing investment firms, financial instruments, trading venues and investor protection. It is the regime that applies to tokenized securities. Authorisation as a MiFID investment firm carries an EEA passport for the services and instruments the licence covers.

Regulation (EU) 2022/858, a time-limited regime allowing market infrastructures to trade and settle tokenized financial instruments with targeted exemptions from CSDR and MiFID II requirements that assume a central securities depository. It carries volume caps and was designed to generate evidence for permanent reform.

A multilateral trading facility operating under the DLT Pilot Regime and admitting DLT financial instruments to trading. It may combine trading and settlement functions in one entity, which conventional EU market structure separates. Operators need MiFID II authorisation plus the specific pilot-regime permission.

The EU's securities supervisor. It issues technical standards, guidelines, opinions and Q&As that determine how MiCA and MiFID II are applied in practice, maintains EU-level registers, and directly supervises certain entities. Its guidance is where token classification questions are usually settled.

Regulation (EU) 909/2014 on central securities depositories and settlement. It sets authorisation requirements for CSDs, mandates book-entry form for transferable securities admitted to trading, and imposes settlement discipline. Its assumptions about a central register are the friction tokenized settlement runs into.

The EU's retail fund framework, with eligible-asset rules, diversification limits, liquidity requirements and a retail passport. Its eligible-asset constraints are the principal reason most tokenized funds in Europe are structured as alternative investment funds rather than as UCITS.

Directive 2011/61/EU, the EU regime for managers of alternative investment funds: private equity, venture, credit, real estate and hedge strategies. It regulates the manager rather than the fund, imposing depositary, valuation, risk-management, remuneration and reporting obligations, and provides a marketing passport to professional investors.

The authorised entity responsible for portfolio management and risk management of an alternative investment fund under AIFMD. Tokenizing a fund does not remove the need for an AIFM. It changes how the register is kept, not who is accountable for managing the fund.

The party maintaining the official record of ownership of a fund or security and processing subscriptions, redemptions, transfers and corporate actions. In a tokenized structure the on-chain register can perform the record-keeping, but legal responsibility for its accuracy still sits with a named, appointed party.

The entity keeping the register of holders of a security and ensuring it reflects legal title. Registrar and transfer-agent roles overlap and are often held together. On-chain registers make the holder list continuously readable; they do not remove the requirement that it be legally authoritative.

A regulated entity permitted to hold client assets, segregate them from its own balance sheet and safeguard them under a specific authorisation. In the EU, custody of crypto-assets is a MiCA service, while custody of financial instruments is a MiFID II ancillary service. The distinction determines which licence is required.

The anti-money-laundering designation, drawn from FATF standards and implemented in national law, for firms conducting virtual-asset business. A VASP registration is an AML supervision status, not a prudential or market-conduct authorisation, and does not by itself permit a firm to provide MiCA services.

Settlement in which the transfer of an asset and its payment leg either both complete or neither does, enforced by the ledger rather than by a post-trade process. It removes principal risk between counterparties and compresses the settlement cycle toward instantaneous.

The settlement convention requiring that securities are delivered only if payment is made, and that payment is made only if securities are delivered. On-chain, it can be enforced inside a single transaction. That requires the cash leg to exist on the same ledger, which is why tokenized cash matters to tokenized securities.

The value of a fund's assets less its liabilities, expressed per unit. It is the reference price for subscriptions and redemptions and is struck on a defined schedule by, or under the oversight of, the fund's administrator and depositary. Tokenization does not change how NAV is calculated.

The ratio of a vehicle's traded market price to its net asset value. Above one, the market pays a premium; below one, a discount. It is the standard measure applied to listed vehicles and to digital asset treasury companies whose holdings have independently observable prices.

A treasury function that holds, manages and deploys digital assets under defined policy: custody arrangements, counterparty limits, liquidity ladders, valuation and reporting. It is a balance-sheet discipline rather than a product, and its credibility rests on the custody and control framework beneath it.

An open token standard for permissioned securities on EVM-compatible chains. Transfers are validated against on-chain identity and compliance rules before they execute, so eligibility is enforced by the token itself rather than by a party reviewing transfers after they have already settled.

A transfer that executes only if the receiving party satisfies encoded conditions: verified identity, jurisdiction, investor category, holding period or holder limits. It is how securities-law restrictions survive on a public ledger, and it is the mechanism that lets a tokenized security be transferable and restricted at once.

Recording the addresses that have passed identity, sanctions and eligibility checks so that they may hold or receive a given token. The whitelist is the operational expression of investor-eligibility rules, and maintaining it is a continuing obligation rather than a one-off onboarding step.

The ledger record treated as the register of holders of a security or fund. Its value is that ownership is continuously reconcilable rather than reconstructed periodically from several sets of books. Legal recognition of such a register depends on national law, which still varies across member states.