What Is Tokenized Equity?

Tokenized equity refers to the digital representation of ownership in a company or organization using blockchain-based tokens or “coins.” These tokens function much like traditional shares but are created, transferred, and recorded on a blockchain network.

With the growing adoption of decentralized technologies, businesses are leveraging tokenized equity as a modern method of raising capital—issuing digital tokens that represent shares in their company, accessible and tradable via blockchain platforms.

Key Takeaways

• Tokenized equity is the creation of equity ownership in the form of blockchain-based digital tokens.
• It emerged with decentralized blockchain systems enabling affordable, fast, and borderless equity issuance and trading.
• Often used in Initial Coin Offerings (ICOs) and Security Token Offerings (STOs), tokenized equity opens new funding avenues, though regulatory clarity is still evolving.
• Ownership is recorded on a blockchain rather than in a traditional brokerage or Demat account.

Understanding Tokenized Equity

Tokenized equity is conceptually identical to traditional shares—it confers ownership rights, potential dividends, and voting power. However, the mode of issuance, custody, and trading is fundamentally different.

Traditional Equity:
When you buy stock through an IPO, shares are credited to your Demat or brokerage account, maintained by a centralized clearinghouse.

Tokenized Equity:
With tokenized shares, ownership is recorded on the blockchain and stored in your digital wallet. These shares are cryptographic tokens issued via smart contracts.

Why Tokenize Equity?

Traditional fundraising methods involve:

• Extensive regulatory and compliance processes
• Dependence on banks or institutional investors
• Difficulty accessing global capital markets

Tokenized equity offers:

• Fractional ownership (e.g., owning 0.1% of a company)
• 24/7 market access and liquidity through peer-to-peer trading
• Lower costs and faster settlement compared to stock exchanges
• Programmable equity (e.g., automated dividend distribution, shareholder voting)

Instead of relying on gatekeepers, businesses can raise funds directly from interested global investors, whose valuation is driven by market forces rather than private negotiation or legacy frameworks.

Challenges and Considerations

Despite its advantages, tokenized equity faces several risks:

• Regulatory uncertainty: Many jurisdictions have yet to establish clear frameworks
• Security threats: Digital asset theft and smart contract vulnerabilities
• Lack of investor protections: Especially in decentralized and anonymous environments

Tokenized Equity in Practice: Quadrant Biosciences

Quadrant Biosciences Inc., a U.S.-based biotechnology company, tokenized its entire equity via the Quadrant Token, offering 17% of its diluted equity in a digital token sale.

• Amount raised: $13 million
• Token price: $1.25
• Platform: Native blockchain infrastructure
• Token utility: Represents traditional equity with full shareholder rights

The system supports core corporate actions including:

• Dividend distribution
• Shareholder voting
• Mergers, acquisitions, and follow-on sales

Leading Platforms for Tokenized Equity

Several blockchain platforms support regulated tokenized equity issuance and trading:

• tZERO
• Polymath
• Securitize
• Templum

These platforms integrate KYC/AML compliance, smart contract governance, and secondary market capabilities.

Example of Broader Tokenization: BlackRock’s Digital Liquidity Fund

In 2024, BlackRock launched the USD Institutional Digital Liquidity Fund (BUIDL) on the Ethereum blockchain, marking a major move into tokenized finance.

• Each token is pegged to $1 in value
• Investors receive daily dividends as newly issued tokens
• Fund holdings include U.S. Treasury bills, cash, and repurchase agreements
• Securitize serves as the transfer agent and tokenization platform

While BUIDL is not tokenized equity, it demonstrates the potential of blockchain to power secure, efficient, and regulated financial instruments.

Tokenized Equity vs Traditional Stock Ownership

Feature	Tokenized Equity	Traditional Stock
Custody	Digital wallet	Brokerage or Demat account
Issuance	Blockchain smart contracts	IPOs or stock exchanges
Trading Hours	24/7 global P2P	Stock market hours
Transfer Method	Direct via blockchain	Clearinghouse-mediated
Regulation	Emerging and evolving	Well-established legal framework