What you own when you own a tokenized share

A tokenized share is a token on a blockchain that stands for a stock, a fund, or a bond. The word covers four different things, and the difference decides what you can do if something goes wrong. Ten programs sell a token called NVDA. None of them gives you the NVIDIA share in your own name.

The first kind is the share itself. The company’s transfer agent keeps its list of owners on the blockchain, so moving the token moves your name on the list. Superstate’s Opening Bell works this way for a handful of small companies. The second kind is a pointer: the token tells the agent to update the list, and until it does, the list wins. The third kind is a custodian’s claim. A firm buys the real share and holds it in its own name, and your token is a receipt against that firm. Coinbase’s tokenized stocks are this: the shares sit at a broker called Alpaca, and a Coinbase company in Abu Dhabi holds them for you. The fourth kind is a note. A company promises to pay you whatever the share is worth. You own a debt, not a share, and you have no vote and no claim on the company behind the ticker. Robinhood’s stock tokens and Ondo’s are notes.

Two things follow. The protection you are used to at a brokerage, SIPC insurance, covers a broker holding your securities. It does not cover a token in your own wallet, whatever that token stands for. And most of these programs are not sold to Americans at all. The issuer’s own terms say so, and a US client who buys one on an exchange anyway holds something the issuer can freeze or cancel.

Every token also has keys. In most programs one private key, held by the issuer, can freeze your wallet, pause every transfer, or take the tokens back. That is not a flaw; it is how the issuer obeys a court order. But it means the token is only as safe as the company holding the key.

Ketju keeps one file per program. It quotes the issuer’s own documents on what the token is, who may hold it, how you get your money out, and who holds the keys. It reads the contracts every day and tells your advisor when something changes. Your advisor checks the file against four facts about you: whether you are a US person, your investor status, the account type, and your state. The answer is Terms met, Terms not met, or Not stated when the issuer has not said.

• Which of the four kinds is the token I hold, and who keeps the official record?
• Does the issuer’s own document say a person like me may hold it?
• If I want out, do I get the share, cash, or a promise, and how long does it take?
• Who holds the key that can freeze it?