Asset Tokenisation and Offshore Structures: The Legal Framework in 2025

The Convergence of Tokenisation and Offshore Structuring

Asset tokenisation — the representation of ownership rights in real-world assets through digital tokens on a distributed ledger — has moved from experimental concept to institutional practice. In 2025, tokenised real-world assets (RWAs) encompass real estate, private equity, debt instruments, commodities, art, and intellectual property, with total tokenised asset value projected to exceed $10 billion.

The legal challenge at the heart of tokenisation is straightforward: a token on a blockchain has no inherent legal status. It is a database entry. For a token to represent ownership of a real-world asset, a legal framework must exist that recognises the token as conferring rights — whether as a security, a unit in a collective investment scheme, a debt instrument, or some other legally defined interest.

Offshore jurisdictions have responded to this challenge by enacting specific legislation that bridges the gap between digital tokens and legal ownership.

Cayman Islands: The Securities and Digital Assets Framework

The Cayman Islands has established itself as the leading jurisdiction for tokenised fund structures through a combination of existing fund legislation and targeted digital asset provisions.

Virtual Asset (Service Providers) Act, 2020 CIMA's VASP framework covers the issuance, custody, and transfer of virtual assets, including tokens representing interests in real-world assets.

Securities Investment Business Act (SIBA) Where a token constitutes a "security" under SIBA — which includes shares, debt instruments, and units in a collective investment scheme — the issuer must comply with SIBA's requirements or benefit from an applicable exemption.

Mutual Funds Act and Private Funds Act Tokenised fund interests (e.g., LP tokens in a tokenised venture fund) are regulated under the existing fund framework. The Cayman Islands Monetary Authority has confirmed that the form of the interest (token vs. traditional certificate) does not affect its regulatory classification.

Practical application: A typical Cayman tokenised asset structure involves:

1. A Cayman exempted limited partnership or exempted company that holds the underlying real asset
2. Tokenised interests in the vehicle issued on a blockchain (Ethereum, Polygon, or a permissioned ledger)
3. A transfer agent or registrar that maintains the connection between on-chain token records and the legal register of members/partners
4. A VASP-registered custodian that provides secure custody of the tokens

Cost: Formation of a Cayman tokenisation structure typically costs $50,000-$150,000, with annual maintenance of $30,000-$80,000 depending on the complexity and regulatory status.

BVI: The Securities and Investment Business Act Framework

The British Virgin Islands offers a cost-effective alternative for tokenised asset structures:

BVI Business Companies Act, 2004 BVI companies can issue shares and other securities in tokenised form. The BCA does not prescribe the form of a share certificate, meaning that a token recording share ownership on a distributed ledger can constitute valid evidence of title.

Securities and Investment Business Act (SIBA), 2010 Where tokenised interests constitute securities, the issuer must comply with SIBA or benefit from an exemption. The professional investor exemption is commonly used for tokenised offerings.

BVI Virtual Assets Service Providers Act, 2022 Entities providing virtual asset services in or from the BVI — including the issuance of tokens representing asset interests — must register with the BVI Financial Services Commission.

Key advantage: The BVI's lower cost base makes it suitable for smaller tokenisation projects. Formation costs are typically $10,000-$40,000, with annual maintenance of $8,000-$20,000.

Liechtenstein: The Token and TT Service Provider Act

Liechtenstein's Token and Trustworthy Technologies Act (TVTG), which entered into force on 1 January 2020, is the world's most comprehensive legislation specifically designed for asset tokenisation.

The TVTG introduces the "Token Container Model," which treats a token as a container that can represent any right:

• Property rights: Tokens can represent ownership of physical assets
• Membership rights: Tokens can represent shares or partnership interests
• Debt claims: Tokens can represent bonds or loan agreements
• Usage rights: Tokens can represent licences or access rights

The TVTG establishes a registration requirement with the Liechtenstein Financial Market Authority (FMA) for TT Service Providers, covering:

• Token issuers
• TT Key Depositaries (custodians)
• TT Token Depositaries
• TT Protectors (validators)
• Physical validators (who validate the connection between a token and a physical asset)
• TT Exchange Service Providers

Practical advantages:

• The TVTG provides explicit legal certainty for token-asset linkage that most other jurisdictions lack
• Liechtenstein is an EEA member, providing access to the EU single market
• The FMA has developed significant institutional expertise in tokenisation

Cost: Liechtenstein tokenisation structures typically cost €80,000-€200,000 to establish, with annual costs of €40,000-€100,000.

Switzerland: The DLT Act

Switzerland amended its Code of Obligations and several financial market laws through the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (the "DLT Act"), which entered into force in stages between 1 February 2021 and 1 August 2021.

Key provisions:

• DLT securities (Registerwertrechte): A new category of uncertificated securities recorded on a distributed ledger, with the same legal status as traditional securities
• DLT trading facilities: A new licence category for trading venues that admit DLT securities
• Segregation in bankruptcy: DLT-based assets can be segregated in the bankruptcy of a custodian, providing protection for token holders

Switzerland's approach provides strong legal certainty within a well-regulated onshore environment, but at higher cost than offshore alternatives.

The Legal Architecture of a Tokenised Asset

Regardless of jurisdiction, a compliant tokenised asset structure must address:

The Token-Asset Link

The legal mechanism by which the token confers rights to the underlying asset. Options include:

• Direct tokenisation: The token IS the security (as under Liechtenstein's TVTG or Switzerland's DLT securities)
• Indirect tokenisation: The token represents an interest in a vehicle that holds the asset (the Cayman/BVI fund model)
• Contractual tokenisation: The token confers contractual rights through a token purchase agreement, with the asset held by a separate entity

Smart Contract Governance

The smart contract that governs token transfers must incorporate:

• Transfer restrictions (to prevent transfers to non-qualified investors or sanctioned persons)
• Whitelisting of approved wallet addresses
• Forced transfer capability (for regulatory compliance, court orders, or error correction)
• Pause functionality (to halt trading in the event of a security breach or regulatory action)
• Compliance with the applicable securities law exemptions (e.g., maximum number of holders, minimum investment amount)

Custody and Safekeeping

Tokenised asset custody involves two layers:

• Token custody: Secure storage of the private keys that control the tokens on the blockchain
• Asset custody: Physical or legal custody of the underlying asset (real estate title deeds, share certificates, commodity warehouse receipts)

Both custody layers must meet the standards required by the applicable regulatory framework.

Secondary Market

For tokenised assets to deliver their promised liquidity benefits, a secondary trading mechanism must exist:

• Security token exchanges: Regulated platforms that list and trade security tokens (e.g., tZERO, INX, SDX)
• Bulletin board / OTC: Peer-to-peer trading facilitated by a registered broker-dealer
• Automated market makers: DeFi-style liquidity pools for security tokens (regulatory treatment varies by jurisdiction)

Securities Law Compliance

Tokenised real-world assets are almost invariably securities under the laws of most jurisdictions. Issuers must comply with:

• Prospectus requirements: Under the EU Prospectus Regulation (EU) 2017/1129, any offer of securities to the public in the EU requires a prospectus unless an exemption applies. Common exemptions include offers to qualified investors only and offers below €8 million
• US securities law: Under the Securities Act of 1933, any offer or sale of securities in the US requires registration or an exemption. Regulation D (Rule 506(b) or 506(c)) and Regulation S (for offshore offerings) are the primary exemptions used for tokenised assets
• UK prospectus requirements: Under the UK Prospectus Regulation, similar prospectus obligations apply for offers to the public in the UK

Key Takeaways

• Asset tokenisation requires a legal framework that recognises the connection between a digital token and the rights it purports to represent — without this, the token is merely a database entry
• Liechtenstein's TVTG provides the most comprehensive legal framework for tokenisation, with its Token Container Model offering explicit recognition of token-asset linkage
• Cayman and BVI offer cost-effective offshore structures for tokenised funds, leveraging existing fund legislation with VASP registration for the digital asset layer
• Switzerland's DLT Act creates a new category of DLT securities with full legal equivalence to traditional securities
• Tokenised real-world assets are almost always securities, requiring compliance with prospectus and registration requirements in each jurisdiction where they are offered
• Smart contracts governing tokenised assets must include transfer restrictions, whitelisting, forced transfer capability, and pause functionality to meet regulatory requirements
• Total costs for establishing a tokenisation structure range from $10,000 (simple BVI structure) to $200,000+ (Liechtenstein TT Service Provider registration with full regulatory compliance)