Tokenisation: But What Are We Talking About?
By Ruth Fairclough, Senior Manager – Industry Collaboration, Irish Funds
Tokenisation has become a familiar topic of market discussions, but as the term is used more widely, its meaning has become less clear, raising what feels increasingly like a branding problem. The financial services industry has never been short on acronyms or corporate jargon, but the crossover with blockchain technology has amplified complexity and contributed to a growing sense of confusion. The same term is used to describe everything from familiar financial instruments delivered through, or supported by, distributed ledger technology (DLT), to entirely new asset types with very different risk profiles. In some cases, there are no new assets at all, just changes to the infrastructure, post‑trade processes, platforms or trading venues that markets already rely on. When these different uses are bundled under one term, it becomes harder for people to understand what is actually changing, and where the real risks sit.
It is also worth noting that tokenisation is not moving at a single speed. Different use cases are progressing at very different paces, largely depending on where clear value can be unlocked. This is not unusual. Most technologies follow this pattern. Cloud computing, for example, was widely adopted for data storage and analytics long before organisations were willing to migrate core systems. The benefits were obvious, the risks manageable, and the business case clear. Tokenisation will follow a similar path. Some applications are advancing quickly because they solve practical problems today; others remain longer term or more experimental, interesting, but not yet essential.
At its core, tokenisation is best understood as a change in how information is recorded and shared, often enabled by distributed ledger technology e.g. in the fund framing this means recording transactions, positions and transfers across recordkeepers such as the Custodian, the Administrator, the Auditor. Financial markets today operate on a vast network of databases, most of them siloed. Each intermediary, institution and platform maintains its own records, and a considerable amount of effort goes into reconciling differences between them. Tokenisation introduces a shared ledger that multiple authorised parties can rely on at the same time. It does not remove rules, governance or oversight, but it can reduce duplication, delays and manual intervention by establishing a more consistent source of data.
The idea of a “single source of truth” can sound ambitious, but in practice it is quite pragmatic. This is about modernising the foundational mechanics that sit behind market activity. Transparency, in this context, is technical rather than philosophical. It is about better data integrity, fewer reconciliation steps, and systems designed for automation rather than constantly compensating for fragmentation. In a world still heavily reliant on spreadsheets, data feeds and constant reconciliation, this can feel like a welcome evolution of markets built over centuries of paper‑based processes, even if many of those processes are now STP (Straight Through Processing – an acronym we use so often in the industry that we sometimes forget it is one). This could be described as wholesale transformation rather than incremental efficiency, and that distinction matters. The investment of time and cost for wholesale transformation is real, and it is typically borne first by early adopters. But standing still is not neutral either; as market structures evolve, those who are not engaged may find that the market moves on without them.
One of the clearest early examples of tokenisation in practice is the tokenisation of fund shares. Irish Funds has previously published a paper on fund tokenisation which goes into some detail on considerations for managers to launch a tokenised fund or share class, so do give it a read[1]. Here, the underlying product remains unchanged. These are regulated funds, investing in familiar assets and governed by existing legal frameworks. What changes is how ownership records are created, maintained and transferred. Instead of relying solely on traditional transfer agency systems, fund shares may be issued or mirrored on distributed ledger technology, often alongside existing arrangements.
For asset managers, administrators and distributors, this can create operational efficiencies: faster settlement, clearer visibility of holdings, and more flexible distribution models. For investors, the economic exposure and risk profile of the fund does not change simply because the register is maintained using new infrastructure. Yet tokenised fund shares are often discussed alongside crypto assets, which can obscure this distinction. The technology may be new, but the asset exposure is not.
A second area where tokenisation is gaining attention is digital cash. Efficient markets depend on efficient settlement, and the cash leg of a transaction is often the slowest moving part. In this context, digital cash refers to a range of mechanisms designed to represent money in a form that can operate natively within tokenised environments. These include asset‑backed stablecoins issued by regulated entities, tokenised commercial bank deposits, and central bank digital currencies (CBDCs). Each form differs in its issuer, backing, and degree of integration with existing financial infrastructure, but all aim to modernise how cash functions in market settlement.
To be clear, cash has been digital for decades. The difference lies not in digitisation itself, but in programmability and interoperability with tokenised assets. When cash can move on the same rails as tokenised securities, it enables atomic or near‑simultaneous settlement of asset and cash legs of a trade. This can materially reduce counterparty and settlement risk, and allow markets to operate beyond traditional trading hours.
As with other examples of tokenisation, design choices matter. The risks associated with digital cash depend less on the fact that it is tokenised and more on who issues it, how it is backed, and how it fits within existing monetary and regulatory frameworks. In that sense, some forms of digital cash—such as well‑regulated, fully backed stablecoins—are already a pivotal unlock for practical on‑chain settlement, while others remain more conceptual or policy‑driven.
Beyond assets and settlement instruments, tokenisation, and the DLT systems that often support it, may also influence the way market infrastructure operates more broadly. Trading venues, clearing processes, collateral management and post‑trade workflows could evolve if shared ledgers become more common. Some activities that currently rely on messages between systems could be executed directly on common platforms, simplifying certain parts of the market operating model.
These infrastructure‑level use cases tend to progress more cautiously, and with good reason. Market foundations are critical, and reliability matters more than speed. Nobody wants to discover operational risk through live market disruption. Here again, however, language can blur distinctions. Infrastructure modernisation can sound like asset innovation when both are described using the same term.
Conclusion
Tokenisation does not describe a single development, nor does it imply a single risk profile. It can refer to a new way of recording fund ownership, a more efficient settlement mechanism, a secondary market, or a potential evolution in how markets function behind the scenes. Over time, we may forget that our holding in a fund is maintained using a form of distributed ledger technology, and instead simply recognise the shift toward a faster, more efficient market. For now, however, it is worth resisting the idea of tokenisation as a monolith, and perhaps just dipping a toe into the water.
[1] Available on our website – Irish Funds Publishes New Paper: Mind the Gap – Operational Considerations for the Tokenisation of Irish-Domiciled Funds | Irish Funds Industry Association | International Investments
Connect with the author
With 20 years’ experience in the funds industry, Ruth is the Irish Funds lead for Emerging Technology and Innovation and Digital Assets in Irish Funds. Ruth also works to organise, capture, and deploy knowledge assets, with the aim to foster innovation, enhance efficiency and improve productivity of the Irish Funds team and other related stakeholders. Irish Funds is the voice of the international investment funds and asset management industry in Ireland. We have been the industry’s representative body for over 30 years. With 150 member companies, Irish Funds represents the entire ecosystem of the investment funds and asset management industry in this country. These include fund managers, depositaries, administrators, transfer agents, professional advisory firms and other specialist firms involved in the international fund services industry in Ireland.
Last updated in Sep 2026.