This chapter sets the working definition of tokenisation that the rest of Suit Up is built on. It is aimed at people who already know how tokens work as software and need to understand how they work as legal and accounting objects inside a regulated balance sheet. The single most common error in the field is conflating the technical fact of "an asset represented on a ledger" with the legal fact of "a token that carries enforceable rights against an issuer or custodian". Part 1 separates those, sets out the working test, and pins down two pieces of vocabulary you will hear used loosely.
Definition
Tokenisation is the process of issuing a digital representation of an asset, claim, or right onto a programmable ledger such that the ledger entry is, by legal construction, the operative record of ownership or the operative instrument of transfer for that asset. The CPMI's 2024 taxonomy lands in roughly the same place, framing tokenisation as a process that links an asset to a digital representation on a programmable platform and treating the link itself as the load-bearing piece (BIS CPMI tokenisation report).
The load-bearing words in the definition are "by legal construction" and "operative". Plenty of things you can put on a blockchain are not tokenized in this sense. A spreadsheet exported into an NFT collection of bond CUSIPs is not tokenisation. A scraped feed of property deeds mirrored onto a public chain is not tokenisation. A wrapped representation of a security held in a brokerage account, where the brokerage account is still the legally operative record, is at best a synthetic claim against a custodian and is more accurately described as a derivative reference.
The distinction matters because the bank's lawyers, the regulator, the auditor, and the bankruptcy court all look at the same question, which is: if there is a dispute, which record governs. If the answer is "the entry in the bank's general ledger" or "the registrar's book", then the token is decorative. If the answer is "the entry on the chain", then the token is the security, the deposit, or the unit of fund interest, and a great deal of legal infrastructure has had to be built around that fact. The BIS Annual Economic Report 2024 chapter on tokenisation reads the same way: the meaningful innovation is not that records exist on a chain, it is that the chain entry can be made the legally operative record under specific frameworks (BIS AER 2024 Ch III).
A useful working test. Hand the situation to a junior litigator and ask them where the cause of action sits. If they would plead breach of a custodial agreement and seek delivery of the underlying, the token is a wrapper around an off-chain asset. If they would plead a claim directly against the issuer based on the on-chain record, the asset is genuinely tokenized.
Two further pieces of vocabulary you will hear used loosely. A tokenisation wrapper is the legal documentation that binds the on-chain entry to enforceable rights, typically a trust deed, a fund prospectus, or terms of issuance referencing the smart-contract address. A bearer instrument is one where possession is itself title, historically a paper certificate payable to whoever holds it. Most tokenized securities are deliberately not bearer instruments at law, even though they look like one technically, because regulated issuers cannot lose control over who holds their paper. The closest digital analogue to a bearer instrument is a payment stablecoin moving freely on a public chain subject to issuer-level allow and blocklists, and that resemblance is the reason the major regimes have constructed careful perimeters around it.
A note on scope. This definition is the one that travels for institutional balance-sheet purposes, regulatory capital treatment, and contract law analysis. It is narrower than the marketing definition of "anything onchain" and narrower than some early academic definitions that treated any blockchain-based representation as a tokenised asset. The narrower definition is the one in regulatory texts (CPMI), in prudential standards (Basel SCO60), and in the legal opinions banks actually pay for. If a counterparty uses the broader definition in a meeting, the right move is to ask which of the two they mean before committing to anything in writing.
The next part picks up the mechanics: how a tokenized asset actually lives across the bank's general ledger and the token ledger, with worked examples for a tokenized money-market fund and a tokenized deposit.