TWSE Market Insights

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With the rapid advancement of technology and digital assets, a growing number of digital financial products—such as Bitcoin and Ethereum—have emerged in the market. Since the introduction of Bitcoin in 2009, its intrinsic characteristics have led to extreme price volatility and a lack of monetary system features, rendering it more akin to a speculative and high-risk asset. Subsequently, stablecoins emerged, offering relatively better payment functionality. However, they have yet to be integrated into the global monetary system, and their price stability remains unproven.

Amid these developments, Real World Assets (RWAs) have garnered increasing market attention. RWA tokenization refers to converting ownership of tangible assets (e.g., real estate, vehicles, financial instruments, precious metals, artworks, and carbon credits) into blockchain-based digital tokens, allowing for 24/7 trading. This process eliminates the need for traditional brokers or intermediaries, enabling a fusion of real-world economies and virtual markets. According to Boston Consulting Group, the market value of tokenized RWAs could reach USD 16 trillion by 2030, highlighting its vast potential.

Taiwan's Financial Supervisory Commission (FSC) also echoed this outlook. In a 2024 press release, the FSC announced the formation of the "RWA Tokenization Taskforce" under its FinTech Co-creation Platform, led by the Taiwan Depository and Clearing Corporation (TDCC) in collaboration with six financial institutions. This initiative aims to prepare the groundwork for RWA tokenization in Taiwan with a forward-looking and holistic approach to FinTech development.

Among the various RWA tokenization use cases, fund tokenization is one of the most discussed. Fund tokenization involves digitizing traditional mutual funds—such as bond, equity, or hybrid funds—through blockchain, converting fund units into tokens for circulation and trading. This model not only reduces operational costs for fund management but also enhances liquidity and lowers entry barriers for investors, particularly in cross-border and globalized investment contexts.

Nonetheless, asset tokenization presents several challenges, including legal uncertainties, a lack of technological standards, and potential disruptions to the traditional financial system. Thus, stock exchanges must adopt a prudent yet innovative stance when exploring this domain, working closely with policymakers, technology providers, and market participants to develop industry standards and infrastructure.

This paper explores the relevant topics—including technological implementation, regulatory challenges, and market opportunities—analyzing how stock exchanges can seize first-mover advantages in this paradigm shift to support global investors in achieving more efficient and accessible asset allocation and management.

1. Objectives of RWA Issuance

The main driver behind bringing real-world assets onto the blockchain is the belief that decentralized finance (DeFi) can offer asset holders opportunities and efficiencies unattainable within traditional finance (TradFi). TradFi relies on intermediaries—such as brokers, background checkers, and regulators—to ensure market safety and control, often at the expense of market efficiency and investor access.

When market participants are unwilling to pay intermediary fees, when decentralized regulators refuse to enter the market, or when investors are uneasy about third-party control over transactions, market inefficiencies and missed opportunities arise.

DeFi aims to eliminate these limitations by minimizing or completely removing traditional intermediaries, thereby significantly enhancing efficiency and expanding opportunities. The IMF’s 2022 Global Financial Stability Report noted that DeFi can substantially reduce costs compared to TradFi, due to lower human and operational overhead.

Beyond disintermediation, DeFi also drives internal innovation. For example, the Automated Market Maker (AMM) model enables instant liquidity and execution for asset holders, which is rarely possible in traditional finance. Through tokenization, asset values can also be fractionalized and risks diversified, allowing smaller investors access to high-barrier assets. Furthermore, blockchain's Distributed Ledger Technology (DLT) offers transparency for DeFi participants regarding transaction processes, ownership, and asset valuation.

2. RWA Implementation Process

Ensuring that RWAs are legally valid representations of actual assets typically involves three key stages: off-chain wrapping, information bridging, and RWA protocol demand and supply (see Figure 1).

a. Off-Chain Wrapping

Before integrating real-world assets into blockchain, their valuation, ownership, and legal entitlements must be established off-chain—typically via contracts, mortgages, notes, or other instruments. When legal implications arise from asset representation or ownership transfer, clear procedures must be in place, such as for liquidation, dispute resolution, or enforcement.

b. Information Bridging

This stage involves tokenizing the asset, bringing its economic value, ownership, and rights on-chain through digitization and storage in the blockchain ledger. For regulated securities, compliant DeFi integration may involve obtaining token issuance permits, KYC, AML, CTF compliance, and exchange listing approvals.

Since blockchains cannot natively access off-chain data (e.g., financials of a stock underlying a token), oracles such as Chainlink are required to relay off-chain information on-chain.

c. RWA Protocol Demand and Supply

This step centers on DeFi protocols for RWAs, which serve two functions: facilitating new RWA token creation and encouraging investor participation in their trading and acquisition.

3. Two Common Models of RWA Tokenization

a. Tokenization of Off-Chain Assets

A token issuer locks physical assets in a vault or entrusts them to a third-party custodian. Tokens are then issued on-chain to represent the economic value and rights of the asset, which itself remains off-chain.

b. On-Chain Native Asset Tokenization

Issuers directly launch tokens on-chain that are backed by specific legal rights in the real world. These tokens have intrinsic value without requiring off-chain backing. This model is common for bond assets.

4. Characteristics of RWA Tokenization

RWA tokenization holds immense potential, but achieving large-scale adoption requires overcoming challenges across technology, regulation, and ecosystem development. Below is a summary of its advantages and associated risks:

Advantages:

• Operational Efficiency & Cost Reduction: Automating processes (e.g., supply chain, ownership tracking) via DLT and smart contracts can significantly reduce time and costs.
• Lower Investment Threshold & Higher Liquidity: Tokenization can fractionalize high-value assets like real estate or art into smaller units, making them more accessible and liquid.
• Instant Settlement: Smart contracts enable automatic and simultaneous asset-currency settlement without intermediaries.
• Enhanced Transparency: All blockchain transactions are immutable and transparent, aiding enforcement agencies, researchers, and investor confidence.
• 24/7 Global Trading: Blockchain-based tokenized assets can be traded across time zones and jurisdictions at any time.
• Financial Innovation: RWA tokenization fosters new blockchain-based financial products and services.

Risks:

• Contagion to Traditional Markets: If tokenized assets are linked to traditional markets (e.g., via redemption mechanisms), high volatility or low liquidity in the crypto world could spill over into real economies.
• Mismatched Trading Hours: While digital assets trade 24/7, underlying real-world assets may only settle during business hours, complicating redemptions during crises.
• Speculation Encouragement: Similar to pre-crisis securitization, risky or illiquid assets may be repackaged as safe ones, inflating leverage and systemic risk.
• Increased Exposure for Traditional Institutions: TradFi institutions may accumulate exposure through direct holdings or collateralization.
• Insufficient Disclosure: Lack of transparency in token issuers or collateral could damage investor confidence.

5. Trends in RWA Tokenization

One of the most important metrics in decentralized finance is Total Value Locked (TVL), which tracks the overall value of cryptocurrencies deposited into DeFi protocols. According to statistics, DeFi TVL remained relatively stable throughout 2023, hovering between USD 40–50 billion—significantly lower than the all-time high of nearly USD 180 billion at the end of 2021. The drop is largely attributed to the lack of real-world utility in many DeFi applications and weak tokenomics. However, DeFi investments rebounded in 2024, with TVL reaching approximately USD 110 billion by the end of May.

TVL tied to protocols involving Real World Asset (RWA) tokenization also grew rapidly in 2023. By the end of that year, RWA ranked 6th among all DeFi sectors, having surged from 13th place at the end of Q2 2023. According to DefiLlama, the RWA tokenization sector surpassed USD 11 billion in TVL by March 2025, becoming the seventh DeFi segment to reach the USD 10 billion milestone. Broadly, RWA tokenization applications can be categorized as follows:

a. Tangible Assets

Assets such as gold, artworks, and real estate can be fractionalized and tokenized for on-chain trading. For example, Swiss crypto bank Sygnum, in partnership with art investment firm Artemundi, tokenized a Picasso painting and issued it on the SygnEx platform. In the United States, the platform RealT enables tokenization of real estate. Due to liquidity constraints and legal or tax-related complications, real estate is difficult to tokenize directly. In practice, each property is owned by a legal entity, and RealT tokenizes ownership of that entity on the blockchain. Token holders receive rental income in proportion to their holdings and may participate in property-related decisions via governance mechanisms.

b. Financial Assets

Assets such as bonds, securities, and funds are increasingly being tokenized using blockchain for faster and more efficient transactions. For example:

• Muff Trading AG, a Swiss metal trading company, issued tokenized bonds on the Polygon blockchain in 2023.
• Siemens, a German multinational, issued EUR 60 million in tokenized bonds on Polygon.
• Muff Trading also offered bond subscriptions denominated in USDC, a USD-backed stablecoin.

c. Intangible Assets

These include carbon credits and other environmental commodities. For instance, the Toucan Protocol tokenizes corporate carbon credits on Polygon and Celo blockchains for virtual market trading. In 2024, Neutral, a tokenization infrastructure platform for environmental assets (e.g., carbon credits, renewable energy), partnered with DLT Finance, a BaFin-regulated trading and brokerage firm in Germany. Together, they launched the first regulated tokenized environmental asset exchange, featuring carbon and renewable energy-related RWA products.

6. Introduction to Fund Tokenization

Fund tokenization refers to the process of converting units or ownership rights of securities investment trust funds (hereinafter referred to as "funds" or "mutual funds") into digital tokens that represent investor entitlements. These tokens are issued, traded, settled, and managed on a blockchain or other distributed ledger technology (DLT) platforms. The general process includes:

• Transaction Structure Design: Issuers, fund tokenization platforms, and other participants collaboratively develop the overall architecture in accordance with regulatory requirements. This includes the choice of blockchain/DLT, token issuance terms, and the fund type.
• Investor Subscription: Prospective investors can subscribe to the tokenized fund if they meet the minimum investment threshold.
• Tokenization and Sale: Fund units are tokenized and sold to subscribing investors. Investors obtain ownership of the tokens, while issuers receive funds.
• Secondary Market Trading: Investors may trade tokenized fund units with one another or on authorized exchanges.
• Settlement: Settlement processes for tokenized transactions can be conducted directly on the blockchain or DLT system.

As tokenized fund technologies are still evolving, financial regulators worldwide are closely observing practical developments to evaluate how best to design regulatory mechanisms. The next section of this research draws on recent trends in regulatory frameworks from key international financial authorities and examines practical case studies in major global financial centers. These insights aim to inform Taiwan’s future strategy for developing an appropriate fund tokenization issuance framework.

1. United States

In the U.S., the regulatory approach to fund tokenization follows existing securities laws without enacting specialized legislation. The Securities and Exchange Commission (SEC) has not established specific rules for fund tokens. Instead, fund tokens fall under the broader category of digital assets. In December 2023, the SEC reiterated that existing regulatory frameworks are sufficient to oversee digital assets, including fund tokens, and no new digital asset-specific rules are necessary at present.

The SEC defines digital assets as those issued or transferred using distributed ledger technologies (DLT), such as blockchain. These include virtual currencies, coins, and tokens. To determine whether a digital asset qualifies as a “security” under the Securities Act of 1933, the SEC primarily applies the "investment contract" standard via the Howey Test, established in the 1946 Supreme Court case SEC v. W.J. Howey Co. A transaction is considered an investment contract—and thus a security—if it satisfies the following four elements:

• An investment of money,
• In a common enterprise,
• With an expectation of profits,
• Derived from the efforts of others.

If a digital asset transaction meets these criteria, it is subject to registration and disclosure requirements under the 1933 Securities Act and the 1934 Securities Exchange Act.

The SEC’s FinHub division published a framework in April 2019 clarifying how to assess whether a digital asset constitutes a security. Notably, the term “investment of money” now extends beyond fiat currency to include cryptocurrencies. The third and fourth elements of the Howey Test have been merged into a single factor—whether there is a "reasonable expectation of profit derived from the efforts of others."

Fund token offerings in the U.S. follow similar procedures to traditional funds. Issuers must register with the SEC or seek exemptions, depending on the fund type. Additionally, the SEC has emphasized that digital asset issuers must disclose material information in the same manner as traditional securities issuers.

Platforms offering digital asset securities for trading must register with the SEC as national securities exchanges or qualify for exemptions, such as operating under the Alternative Trading System (ATS) rules. While ATSs face fewer regulatory burdens and greater operational flexibility, they must still comply with Regulation ATS, including requirements around transparency, fair access, market manipulation prevention, and system integrity.

Key differences between ATSs and national exchanges include the fact that national exchanges require trades through registered broker-dealers and limit trading to listed securities, whereas ATSs can facilitate trades in both listed and unlisted securities and typically allow broker-mediated access without mandating use of a specific dealer.

In 2022, the SEC proposed amending Rule 3b-16(a) of the 1934 Act to include blockchain and smart contract-based trading platforms in the definition of a securities exchange. Such platforms would either need to register as exchanges or operate as ATSs while complying with broker-dealer regulations and self-regulatory organization requirements.

In conclusion, the U.S. currently treats fund tokens as digital assets governed by existing securities regulations. Issuers are expected to register under the 1933 Act or qualify for exemptions. Fund tokens can be listed and traded via ATS platforms, without requiring a separate legal regime.

2. United Kingdom

To address emerging opportunities and risks from new technologies, the UK government has adopted a collaborative and phased approach. The Technology Working Group, under the Economic Secretary to the Treasury, in coordination with the Financial Conduct Authority (FCA), His Majesty’s Treasury (HMT), and the Investment Association (IA), has published guidance documents in November 2023 and March 2024 to promote fund tokenization.

Complementing this effort is the enactment of the Financial Services and Markets Act 2023 (Digital Securities Sandbox) Regulations, effective January 2024. This sandbox facilitates experimentation with fund tokenization and helps identify regulatory adjustments and evolving roles of market participants.

On November 24, 2023, the Investment Association released “UK Fund Tokenisation: A Blueprint for Implementation” (the First Report), outlining a phased implementation strategy. The initial phase allows market participants to test fund tokenization using a baseline model under existing laws. DLT is applied in the registry and transaction processes, while other fund operations remain unchanged.

The FCA recognizes that entities using DLT may be classified as crypto asset exchange providers or custodian wallet providers, thereby subject to registration under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. The FCA has proposed streamlined registration for authorized financial firms with prior compliance records. The Investment Association acts as the bridge between government and industry, also coordinating the development of industry standards.

On March 26, 2024, the Investment Association published the “Further Fund Tokenisation” report (the Second Report), providing a model fund prospectus and DLT technical standards. It also explores potential future relaxations, such as on-chain settlement with digital currencies, tokenized portfolio holdings, and use of public blockchain networks. The report introduces Phase 3, which will explore how AI can be leveraged to enhance fund management efficiency and innovation.

3. Hong Kong

The Securities and Futures Commission (SFC) in Hong Kong has observed increasing interest in tokenizing traditional financial instruments. In November 2023, the SFC released a circular outlining guidance for intermediaries engaged in tokenized securities. The foundational regulatory principle is "same business, same risk, same rules," implying that traditional securities laws and regulations apply equally to tokenized securities.

Intermediaries involved in tokenized securities—such as in sales, advisory, management, or secondary trading—must adhere to existing regulatory standards. In addition, the SFC emphasized risks unique to tokenization, including ownership risk (e.g., token transfer and recording) and technological risks (e.g., forking, network outages, cybersecurity). Additional requirements and safeguards are specified through various circulars.

When engaging in the issuance or distribution of tokenized securities, intermediaries must inform clients about settlement mechanisms (on-chain or off-chain), token transfer restrictions, smart contract audit status, DLT-related risks, and custody arrangements. Prior consultation with the SFC is required for new tokenized security issuances or converting existing securities, except in cases where identical terms apply to previously approved token classes.

The SFC has gradually relaxed restrictions, no longer universally categorizing tokenized products as complex and permitting general investor access. As regulatory openness increases, the SFC is simultaneously raising disclosure and risk management requirements to preserve market integrity.

In August 2024, the Hong Kong Monetary Authority (HKMA) launched the Ensemble Sandbox Project to test practical applications of tokenized assets. Phase 1 focuses on:

• Fixed income and investment funds
• Liquidity management
• Green and sustainable finance
• Trade and supply chain finance

The HKMA has built an experimental sandbox enabling cross-bank integration with tokenized deposit platforms, simulating real-time settlements and payments, thus laying the groundwork for asset tokenization and cross-border interoperability.

The HKMA and SFC are working closely to build a supportive regulatory framework for tokenization, including collaboration with the Bank for International Settlements (BIS) and CBDC expert groups to explore cross-border applications. Their shared emphasis is on integrating innovation with regulation as a catalyst for Hong Kong’s future financial ecosystem.

In summary, Hong Kong authorities view fund tokenization as a technological transformation of existing products, maintaining that traditional regulatory principles continue to apply. Policy is shifting toward guiding and supporting the market, while strengthening transparency, risk disclosure, and product inclusiveness.

4. Singapore

The Monetary Authority of Singapore (MAS) oversees digital tokens and virtual currencies in Singapore. Rather than crafting dedicated laws, MAS issues interpretive statements and guidance, reflecting a flexible and responsive regulatory posture. MAS aims to build a responsible and innovative digital asset ecosystem that attracts participation and manages cross-border risks.

MAS employs a dual-track strategy:

• Legal Track: The Securities and Futures Act (SFA) forms the legal backbone. Digital tokens qualifying as capital market products must adhere to SFA rules, including public prospectus requirements (unless exempt), platform licensing, and AML/CFT compliance.
• Technology Track: MAS has initiated Project Ubin, Project Guardian, and Project Orchid to explore distributed finance, asset tokenization, and central bank digital currencies (CBDCs).

In particular:

• Project Ubin (since 2016) tested wholesale payments and securities settlement via DLT. It included cross-border CBDC experiments with the Bank of Canada.
• Project Orchid (since 2022) focuses on programmable retail CBDCs, exploring applications like government vouchers and public subsidies.
• Project Guardian (since 2022) is MAS’s flagship initiative for asset tokenization. Over 40 global institutions (Citibank, HSBC, Standard Chartered, UOB, etc.) have conducted sandbox tests covering tokenized funds, bonds, FX, and multi-currency use cases.

The 2023 Guardian Report outlined four focus areas:

• Open and Interoperable Networks
• Trust Anchors (regulated entities issuing verifiable credentials)
• Asset Tokenization (e.g., bearer tokens, tokenized deposits)
• Institutional-grade Protocols (with embedded controls and compliance features)

The report emphasizes the digital asset network concept, aiming to integrate DLT-based finance with global standards.

Looking ahead, MAS will focus on enhancing tokenized asset liquidity, establishing token market infrastructure, standardizing frameworks, and achieving shared settlement systems. Initiatives like the Guardian Wholesale Network and Global Layer One aim to support seamless cross-border tokenization.

MAS has also released the Guardian Fixed Income Framework and Guardian Funds Framework, providing best practices for debt and fund tokenization. MAS supports trials of wholesale CBDC transactions via the SGD Testnet.

In summary, Singapore pursues a gradual and multi-dimensional strategy for digital asset development, combining regulation, experimentation, and industry collaboration. With a consistent policy of regulatory clarity and innovation openness, Singapore is shaping a stable yet forward-looking financial ecosystem.

1. United States

a. Franklin OnChain U.S. Government Money Fund (FOBXX)

In April 2021, U.S. asset management firm Franklin Templeton launched the Franklin OnChain U.S. Government Money Fund (FOBXX), the first SEC-approved mutual fund to use a public blockchain for processing transactions and recording share ownership. The fund invests 99% of its assets in short-term U.S. Treasuries, cash, and repurchase agreements collateralized by U.S. Treasuries or cash.

FOBXX’s primary innovation lies in its integration of blockchain technology into fund operations to enhance transaction efficiency and transparency. Transactions and ownership records are primarily maintained on the Stellar blockchain, though eligible investors may opt for other supported chains such as Polygon, Aptos, Avalanche, or Arbitrum. The fund units are represented by BENJI tokens, which are non-tradable utility tokens used to reflect individual holdings within the fund.

Franklin Templeton Investor Services, LLC serves as the transfer agent and blockchain ledger manager, while Franklin Templeton Services, LLC handles administrative services. Investors can access the fund via the Benji app or website, where blockchain wallets are automatically created upon account registration. The minimum investment threshold is USD 20, and only whitelisted qualified investors can participate.

The fund complies fully with SEC regulations, including prospectus disclosures, daily NAV reporting, AML/KYC requirements, and does not benefit from regulatory leniency due to its blockchain use. Franklin Templeton’s digital asset lead emphasized blockchain's potential to reshape asset management by improving transparency, transaction speed, and lowering operational costs.

As of early 2025, FOBXX had grown to approximately USD 594 million in assets under management (AUM), ranking as the world’s third-largest tokenized money market fund, after Hashnote’s USYC and BlackRock’s BUIDL. In February 2025, Franklin Templeton expanded the fund to the Solana blockchain, citing its high throughput, low cost, and developer-friendly infrastructure.

FOBXX stands as a pioneering example of regulatory-compliant tokenized fund operations, demonstrating scalability, multi-chain interoperability, and practical applications for traditional financial institutions.

b. BlackRock USD Institutional Digital Liquidity Fund (BUIDL)

In March 2024, BlackRock Inc. launched its first tokenized fund—BlackRock USD Institutional Digital Liquidity Fund (BUIDL)—in collaboration with Securitize. This ERC-20-based fund operates on the Ethereum blockchain and represents a major step toward blockchain integration within traditional finance.

BUIDL is a private money market fund offered under Regulation D, Rule 506(c) of the 1933 Securities Act and is limited to accredited investors. Structured as a Limited Liability Company (LLC) and issued by a special purpose vehicle (SPV), the fund allocates 100% of assets to cash, U.S. Treasuries, and repurchase agreements, targeting high liquidity and stable income. It maintains a $1 per unit value and uses a bankruptcy-remote structure to protect investors’ funds. BNY Mellon serves as administrator and custodian.

Investors can subscribe using USD wire transfers or USDC, with Zero Hash assisting in crypto-to-fiat conversion. Upon completion of AML checks, BUIDL tokens are distributed via a transfer agent to investor wallets. The tokens have a 24-hour lock-up period, after which they become tradable or redeemable. Redemptions are processed through the Securitize platform, with tokens being burned upon payout.

Unlike traditional funds with monthly/quarterly distributions, BUIDL offers daily income allocation, enhancing reinvestment and compounding potential.

BUIDL integrates DeFi partnerships and liquidity mechanisms. A 1:1 redemption system with Circle’s USDC facilitates efficient capital deployment. The fund is already accepted on Ondo Finance and Ethena platforms; in March 2025, Ethena added USD 200 million in BUIDL to its reserves.

BUIDL is also the first tokenized fund deployed across seven major public chains—Ethereum, Polygon, Arbitrum, Optimism, Avalanche, Aptos, and Solana—enhancing interoperability and global investor accessibility.

As of March 2025, BUIDL’s AUM exceeded USD 1 billion, validating market demand for programmable, compliant tokenized financial products. Its comprehensive digitization—from fundraising to redemption—represents a practical prototype for tokenized asset management.

2. United Kingdom

Abrdn (Aberdeen Investments) began experimenting with tokenizing its Aberdeen Standard Liquidity Fund (Lux)–Sterling Fund in 2023, a GBP 15 billion money market fund.

Technologically, Abrdn partnered with Archax, a UK-regulated digital asset exchange, using the Archax Tokenisation Engine to manage token issuance and transfers. Unlike other projects based on Ethereum, Abrdn utilized the Hedera Hashgraph for its high throughput and low cost. The tokenized units are recorded and managed off-chain via Archax, handled by regulated intermediaries.

The fund retained its original legal classification, and the tokens were treated as digital representations of fund shares. Professional investors could trade tokens directly on Archax, while retail investors were required to go through authorized brokers. The fund remained subject to Luxembourg and EU financial regulations.

Tokenization addressed traditional hurdles like high investment minimums and operational complexity. By allowing fractional ownership, smaller investors gained access. Blockchain technology also streamlined processes like KYC, NAV tracking, and settlement, reducing costs and enhancing efficiency.

Other UK asset managers have followed suit:

• Fasanara Capital launched a tokenized fund on Polygon
• Fidelity International used J.P. Morgan’s Onyx Digital Assets platform

These initiatives illustrate the UK industry’s strong momentum toward fund tokenization.

3. Hong Kong

In late 2023, Harvest Global Investments Limited completed its first tokenized fund in line with Hong Kong’s SFC guidelines. The fund invested in high-rated U.S. Treasuries and used the Stellar blockchain for tracking and transfers. Each token represented a fund share and was processed through a centralized issuance and burning mechanism to ensure transparency and traceability.

Although the SFC does not limit tokenized funds to professional investors, Harvest initially restricted access for compliance purposes.

Challenges in Hong Kong include infrastructure limitations, high integration costs, cross-jurisdictional legal gaps, and low secondary market activity due to limited investor familiarity.

In October 2024, Bank of China (Hong Kong) completed a proof-of-concept in the HKMA’s Ensemble sandbox, testing tokenized money market fund subscriptions and redemptions using tokenized deposits, achieving atomic settlement.

These cases reflect Hong Kong’s regulatory openness and willingness to support innovation while enhancing investor protection and market infrastructure.

4. Singapore

a. DigiFT

Founded in 2021, DigiFT is a Singapore-based regulated digital asset exchange. In December 2023, it received both the Capital Markets Services (CMS) license and Recognized Market Operator (RMO) status from MAS, allowing it to operate both primary and secondary markets for security tokens.

The platform, built on Ethereum, utilizes Automated Market Maker (AMM) mechanisms and supports tokenized bonds, equities, and Collective Investment Schemes (CIS).

In March 2024, DigiFT launched two index-based tokenized funds:

• AI Index Fund: Tracking tech leaders like Apple, Tesla, Microsoft, Nvidia
• Web3 Index Fund: Including Bitcoin, Ethereum, Solana

These funds are available to qualified investors, with 24/7 settlement using USDT or USDC, managed by Hash Global and issued in collaboration with Amber Premium.

DigiFT also introduced the DigiFT U.S. Treasury Token (DUST), investing in short-term AA+-rated U.S. Treasuries, offering a secure, liquid, blockchain-native cash substitute.

The platform is also working with UBS Asset Management, Invesco, and others to scale tokenization and expand its Real World Asset (RWA) service framework.

b. SGD Delta Fund

In November 2023, FundBridge Capital launched the SGD Delta Fund, a sub-fund under its Delta Master Trust. The fund invests in Singapore Government Securities, MMFs, cash equivalents, and cash. FundBridge holds a CMS license from MAS.

It collaborated with Libeara for tokenization services and with Vistra for fund administration (NAV, distribution, accounting). Perpetual (Asia) Ltd. serves as trustee, with CGS-CIMB Securities as custodian.

Only whitelisted investors can participate. Ethereum wallet holders can invest using XSGD stablecoins, while others use fiat to access the fund via Stellar-based wallets.

The fund leverages DLT and smart contracts for cost savings and instant settlement. Investors can monitor holdings in real time, and token transfers are allowed among verified participants. Though the fund’s assets are AAA-rated, Moody’s rated the fund AA, citing limited fund management track record.

1. Research Summary

With the rapid development of digital assets and blockchain technology, fund tokenization has emerged as a core application of financial innovation. Unlike traditional mutual funds, which rely on centralized systems for share registration and transaction settlement, fund tokenization refers to the use of blockchain and distributed ledger technology (DLT) to issue and manage fund shares in tokenized form. This simplifies and automates processes traditionally requiring multiple intermediaries, enabling transparent and secure on-chain recordkeeping.

As tokenized funds offer a variety of potential benefits, major financial markets—including the United States, United Kingdom, Hong Kong, and Singapore—are actively exploring and promoting fund tokenization within existing regulatory frameworks. Key observed benefits from case studies include:

• Enhanced Operational Efficiency and Cost Reduction: Tokenization reduces manual intervention through smart contracts that automate compliance checks, investor verification, share registration, and redemption—minimizing errors, shortening transaction times, and lowering administrative costs.
• Capital Efficiency via Instant Settlement: Traditional funds often follow T+2 or T+3 settlement cycles, tying up funds in the interim. Tokenized funds enable near-instantaneous settlement, allowing faster reinvestment and capital deployment.
• Lower Investment Barriers: By fractionalizing fund units, tokenization reduces minimum investment thresholds, broadening access to retail investors and promoting financial inclusion.
• Improved Transparency: Blockchain ensures immutable and real-time ownership and transaction records. Investors can verify their holdings and transaction history directly via blockchain explorers or user platforms, fostering trust.
• Greater Liquidity: Tokenized funds support 24/7 trading and on-chain settlement, enhancing liquidity and allowing flexible asset allocation.
• New Income-Generating Scenarios: Tokenized fund units can be used as collateral in DeFi protocols for lending, staking, or liquidity mining, offering additional income opportunities and expanding financial use cases.

Across the observed jurisdictions, fund tokenization remains in an exploratory and institutionalization phase, with several shared trends:

• Collaborative Issuer-Tech Partner Models: Most asset managers lack blockchain expertise and therefore partner with technology firms or subsidiaries (e.g., Harvest Global and Meta Lab; DigiFT and issuer platforms). These partnerships promote modular system development while distributing technical risk.
• Conservative Asset Selection: Tokenized funds typically focus on low-volatility, highly liquid assets like U.S. Treasuries and money market instruments—facilitating regulatory approval and investor acceptance.
• Investor Eligibility Restrictions: Most implementations are limited to qualified investors, whitelisted entities, or private placements—ensuring regulatory containment during early trials and protecting retail investors.

Technically, these products rely on DLT for transaction recording and asset storage, with smart contracts automating workflows. Tokenized fund units enable synchronized settlement across blockchain nodes, bypassing intermediaries and improving accuracy. Fiat currency-based purchases still require custodial banks, but crypto-based transactions allow full on-chain custody and redemption.

In summary, fund tokenization combines blockchain, smart contracts, and digital payments, preserving the value proposition of traditional funds while offering higher efficiency, transparency, and flexibility. Despite challenges—such as regulatory ambiguity, infrastructure limitations, and underdeveloped secondary markets—evidence suggests fund tokenization is entering a pivotal phase of institutionalization and commercialization. As regulatory clarity improves and cross-border platforms mature, tokenized funds could become a central pillar of the future asset management ecosystem.

2. Research Recommendations

Looking at the development of fund tokenization in various countries, it is clear that establishing robust infrastructure has become a central policy focus. These international experiences provide valuable insights for Taiwan as it considers future steps. At present, Taiwan still faces several key issues that require clarification and consensus, such as whether to adopt public or private blockchain systems, and whether to promote tokenized funds through public or private offerings. These topics call for ongoing dialogue among regulators, industry players, and market participants.

Taking inspiration from other countries:

• Singapore’s Project Guardian promotes open and interoperable networks to enable cross-platform circulation of digital assets.
• The UK’s second fund tokenization report outlines technical and data format standards to guide industry implementation.

In Taiwan’s context, infrastructure development should prioritize interoperability and shared technical standards. For example, Taiwan could establish a system of “trust anchors”—regulated entities responsible for identity verification and issuance of credentials—to facilitate secure digital transactions. A shared trust layer, jointly maintained by multiple institutions, could create a reliable and transparent transaction network.

Smart contract design can be introduced to help execute regulatory rules throughout the entire fund lifecycle—issuance, subscription, trading, and redemption. This would support automation, legal compliance, and transparency, while also reducing the risk of market manipulation and enhancing the integrity of the tokenized fund ecosystem.

As digital asset technology continues to evolve, it is important to explore fund tokenization in a way that aligns with regulatory requirements and financial stability. The Taiwan Stock Exchange, as a key infrastructure provider in the capital markets, is well positioned to contribute by leveraging its strengths in platform governance, stakeholder coordination, and regulatory integration. Five key roles for the stock exchange in promoting fund tokenization include:

• Developing Standardized Blockchain Infrastructure: Leverage its market infrastructure capabilities to support interoperable systems and cross-platform trading standards.
• Supporting Regulatory Frameworks and Technical Standards: Serve as a bridge between regulators and market participants; assist in integrating token asset rules into the broader supervisory system.
• Piloting and Regulatory Testing: Build sandbox environments to gather operational data and feedback, assess the adequacy of existing laws, and support legal reform if necessary.
• Promoting Industry Collaboration and Innovation: Coordinate asset managers, tech providers, and stakeholders to form alliances and facilitate end-to-end tokenization solutions.
• Leading Investor Education and Protection: Use existing disclosure systems and investor platforms to promote tokenization awareness and risk disclosures, building transparency and trust.

Looking ahead, Real World Asset tokenization, particularly fund tokenization, is a critical area of experimentation and development in global financial markets. For Taiwan, it presents an opportunity not only for financial innovation but also for enhancing capital market competitiveness. Successful adoption depends on market readiness, regulatory adjustments, and industry alignment. Through standards development, pilot initiatives, investor education, and prudent regulation, Taiwan’s stock exchange can play a vital role in ensuring responsible and forward-looking participation in the digital finance landscape.