Tokenising Shares: Revolutionising Ownership and Investment

Belinda Dean

You’re listening to The Unlocking Liquidity Podcast, as read by PrimaryMarkets automation, where we explore innovation, private markets and the evolving landscape of investment opportunities. Today, we’re diving into one of the most talked-about shifts in finance – tokenisation of shares. It’s a concept that’s reshaping how companies raise capital, how investors trade, and ultimately, how ownership itself is recorded and transferred. So – what does it mean to “tokenise” a share? Why is it generating so much excitement? And what are the real-world challenges we need to overcome before tokenisation becomes mainstream? Let’s unpack it.

Belinda Dean

At its core, tokenisation means creating a digital version of something that represents ownership – in this case, a share in a company. Imagine your share registry not as a spreadsheet or a PDF certificate, but as a secure, programmable token recorded on a blockchain. That token directly represents your ownership rights – the right to vote, to receive dividends, to transfer your holdings. These tokens can even carry built-in rules through smart contracts – for example, automatically releasing dividends, enforcing lock-ups, or processing votes during an AGM. It’s more than just digitising a share certificate. It’s about rethinking the plumbing of capital markets – how shares are issued, traded, and settled. In traditional systems, a share transfer can involve multiple intermediaries: a broker, a custodian, a clearing house, and a registry – each adding time, cost and potential for error. In a tokenised world, much of that friction disappears. Transfers can happen peer-to-peer, validated in seconds by secure, consensus-based systems. That means fewer intermediaries, fewer reconciliations, and potentially near-instant settlement.

Belinda Dean

To understand how this works, it helps to think of tokenisation as having three layers: legal, technical, and custody or registry. At the legal layer, the token must truly represent an enforceable equity right. It’s not enough to say “this token equals one share.” It must be recognised under corporate law as conferring the same rights as a share in the company. The technical layer is the blockchain or distributed ledger itself – the system that issues the tokens, validates transfers, and enforces the smart contracts. And finally, there’s the custody or registry layer – where questions arise such as: is the blockchain ledger the official share register? Or is it simply a mirror of the traditional registry? Getting those three layers right is critical. It’s what determines whether tokenisation is a technical experiment – or a legally sound financial instrument.

Belinda Dean

So, what makes tokenisation attractive? Let’s start with fractional ownership. Because tokens can be divided into smaller units, companies can offer micro-shares that make investing more accessible. Think of a company like Commonwealth Bank – where a single share might trade around $160. A tokenised version could split that into 160 micro-tokens worth one dollar each, suddenly opening ownership to a much wider group of investors. That’s democratisation in action. Then there’s liquidity. Private company shares are notoriously difficult to sell. Tokenisation promises to change that – enabling peer-to-peer trading and 24/7 markets, particularly through platforms designed for unlisted securities. For fund managers, tokenisation can make units in private funds tradable, reducing reliance on redemptions and giving investors a smoother path to exit. There are efficiency gains too. Automated settlement, reduced admin and custody costs, fewer reconciliations – all of these can make capital markets cheaper and faster. And because smart contracts can automate tasks like dividend payments or vesting schedules, companies can streamline the entire lifecycle of their securities. Tokenisation can also broaden capital access. In theory, a company could issue tokenised shares that can be purchased by eligible investors anywhere in the world – expanding reach far beyond traditional broker or exchange networks. Finally, there’s interoperability – the ability for tokenised shares to interact with other digital assets and financial products. That could lead to new forms of collateralisation, automated lending, or dynamic portfolio management that simply aren’t possible in today’s fragmented systems. Put all that together, and you have the blueprint for a more efficient, inclusive and connected equity market.

Belinda Dean

For all its promise, tokenisation is far from easy. One of the biggest hurdles is regulation. In most jurisdictions, tokens that represent shares are considered securities – meaning they fall squarely within securities law. They must meet disclosure, registration and licensing requirements. In Australia, that typically means holding or operating under an Australian Financial Services Licence – and meeting obligations around investor protection and compliance. Regulators here are working to catch up. The “Key Policy Reforms for Tokenisation” initiative has recognised the need for clearer taxation, licensing and sandbox frameworks. But the rules are still evolving – and uncertainty can make issuers nervous. Then there’s the legal linkage between the token and the share. If that link isn’t watertight, token holders might not actually hold enforceable shareholder rights. Some overseas offerings have been more like derivatives – giving exposure to a share’s performance but not true ownership. That’s a recipe for investor confusion – and potential legal disputes. Security is another challenge. Ownership of tokenised shares often depends on a private key – a cryptographic code that proves you own the token. Lose that key, or have it hacked, and you could lose your shares permanently. That’s very different to a traditional share registry, where lost certificates can simply be reissued. We also face fragmentation. If every issuer builds their own blockchain system, or if tokenised shares live on isolated ledgers, interoperability becomes a nightmare. The benefits of a global, efficient market could be lost to incompatible infrastructure. And, crucially, tokenisation doesn’t guarantee liquidity. Just because something is tradable doesn’t mean it will actually trade. Without active buyers and sellers, a tokenised share could be just as illiquid as its paper-based predecessor.

Belinda Dean

Tokenisation isn’t just about new investors. It also affects existing shareholders – and sometimes, not in ways they expect. If tokenised shares are introduced alongside traditional ones, voting power or dividend entitlements might shift, creating imbalance or even dilution. There’s also the question of which register is legally binding – the blockchain ledger or the traditional corporate registry. If the two ever diverge, determining who the “real” shareholder is could get messy. Then there are operational risks. Shareholders might need digital wallets and new security habits. Unlike losing a share certificate, losing access to your private key could mean your ownership is gone forever. And we can’t ignore tax implications. In some jurisdictions, converting shares into tokens might be seen as a disposal event – triggering capital gains tax. So, for both companies and shareholders, tokenisation needs to be carefully structured to avoid unintended consequences. The takeaway? Tokenisation isn’t inherently bad for shareholders – but poor design can erode rights and protections.

Belinda Dean

For companies thinking about tokenising their shares, there are a few big questions to answer. First, is the token a direct share – meaning the token is the share – or an indirect token, backed by off-chain equity held by a custodian? That decision affects everything from legal enforceability to regulatory classification. Next, there’s technology choice. Should you use a public blockchain, which is open and global, or a permissioned one, which offers more privacy and compliance control? Many companies are experimenting with hybrid models, combining the best of both. Security and custody are critical too. Tokenised shares will only gain trust if investors are confident their assets are safe – and if recovery or dispute processes are clearly defined. For investors, the key questions are similar: Does this token truly convey legal rights? How is custody managed? What happens if the company delists, merges or winds up? Is there a functioning secondary market, or just theoretical liquidity? And perhaps the most strategic consideration of all – timing. Being an early mover in tokenisation can bring innovation advantages, but it also means facing higher regulatory and execution risks.

Belinda Dean

Tokenising shares represents one of the boldest re-imaginings of equity markets in decades. If done right, it could reduce costs, expand access and bring speed and transparency to systems that have changed little in a century. But the road ahead is complex. Legal systems, regulators, custodians and investors all need to align before tokenisation becomes mainstream. In Australia, the framework is still taking shape. Progress will depend on clear regulation, robust infrastructure, and above all, market confidence. For now, the best advice for companies and investors alike is to proceed carefully. Engage experienced legal and regulatory advisors early. Pilot before you scale. Be transparent about rights and risks. Because tokenisation isn’t a quick fix – but it might just be the foundation of the next evolution in capital markets.

Belinda Dean

At PrimaryMarkets, we’re already seeing how innovation is reshaping private markets. Our platform enables trading in shares of unlisted companies and units in managed funds – providing liquidity where once there was none. We help companies raise capital and connect with a global investor base, all within a flexible, compliant environment that evolves with the market. As tokenisation and other forms of digital ownership continue to emerge, PrimaryMarkets stands ready to support investors and issuers through this next frontier – turning innovation into opportunity. As read by PrimaryMarkets Automation, this has been The Unlocking Liquidity Podcast. Thanks for listening – and if you’d like to learn more about private markets, trading opportunities, or capital raisings, visit PrimaryMarkets.com.