Tokenisation: Due diligence and design considerations

Distributed ledger technology and tokenisation are poised to transform the financial markets. And, with several high-profile tokenisation platforms now moving from the build/test phase towards go-live, the future promised by such technologies is closer than ever.

Firms wishing to reap the benefits of tokenisation will likely need to join a tokenisation platform that provides the infrastructure in which tokens can be issued, settled and/or traded (depending on the design of the platform). Doing so is potentially fraught with risks, which need to be identified and understood by those that bear them. Firms should thus consider undertaking due diligence before joining a tokenisation platform, as is customary with traditional market infrastructures.

This article outlines a selection of legal issues firms may wish to consider as part of that due diligence. Several of the points we raise are equally relevant for firms seeking to design their own tokenisation platforms, although that is not our focus.