Asset Tokenization: Trends & Developments in Cyprus

STELIOS AMERICANOS & CO LLC | View firm profile

Asset tokenization constitutes a relatively new process. Yet, it has been receiving increasing levels of attention across several jurisdictions, with positive indications as to its ability to revolutionize the way different assets are held, traded and used.

  • The process of tokenization involves the fragmentation of tangible (e.g. houses, cars, artwork) or intangible (e.g. bonds, shares, participation rights) real-world assets into digital tokens, which ascribe to their holders a unit of ownership or some other right to those said assets.
  • A token itself essentially constitutes an algorithm that is executed as a Smart Contract on a Blockchain. This Smart Contract will specify the owners and the amount of tokens they hold, and will provide for the Token’s characteristics, such as its monetary value, the number of tokens in existence, the methods in which they can be traded, how voting arrangements are to be carried out and so on.
  • A Blockchain will be used to host these transactions, by recording them in interconnected blocks, a process that is well-known for being very hard to tamper with.

Even so, in light of the increasing complexity and volume of the processes and rights that ascribe to these tokens, regulators and supervisory authorities have taken note of this phenomenon and the need to provide for a legal framework that addresses its effects.

This report will draw on the opportunities that asset tokenization presents, along with the legal challenges for the actors involved. Lastly, it will discuss the stance that different jurisdictions have taken so far to welcome tokens into their economies.