Tokenization

The token is never the asset. It is a record of a claim, and the claim is only worth what the legal structure behind it makes enforceable. Two products described identically can therefore be entirely different instruments, which is the distinction that most often gets lost in the category.

In a custody-backed structure a regulated custodian holds the underlying security and the token is a receipt against something that demonstrably exists and can be independently verified. In a synthetic structure the token represents someone's promise to deliver economic exposure later. The first carries custody risk. The second carries counterparty risk, and fails precisely when ownership is meant to transfer, which is the worst possible moment.

The questions that separate them are legal rather than technical. Who is the registrar of record, and does the issuer recognize the token holder or an intermediary as the owner? What happens if the chain and the register disagree?

Is transfer restricted by the underlying instrument's own terms, which is common for private company shares and has voided tokenized offerings before? The technology works. The wrapper is where these products succeed or fail.