What Do You Really Own On-Chain?

If you buy a token tied to gold, can you redeem it for the metal? Who has to deliver it, and where can you enforce that claim? Frederik Gregaard posed those questions to explain why he still regards much of the tokenization he saw at TOKEN2049 Singapore as experimental. Cardano Community published the interview on November 11, more than a month after the October 7–8 conference, where the Cardano Foundation announced that its CIP-0113 programmable token standard was live on mainnet.

What a buyer can claim

Tokenized gold illustrates the questions an investor faces after a purchase. The terms of the issuance determine whether the holder can request physical delivery, which party is responsible for fulfilling that request, and which jurisdiction governs the claim. Gregaard used those questions to assess whether a tokenized asset delivers the rights investors expect from it.

CIP-0113 addresses how an asset can move between holders. It gives issuers a way to attach rules to native Cardano assets and have the network enforce those rules during a transaction. Depending on the modules an issuer uses, transfers can be restricted to approved addresses, and tokens can be frozen. An issuer that limits transfers to eligible participants can use those controls to apply its eligibility policy when the asset changes hands.

Who can invest in a tokenized fund

Gregaard used reinsurance to explain how tokenization can change the size of an investment. Reinsurance lets insurers transfer part of their risk to other institutions. In the interview, he contrasted the $100 million he associated with traditional access to that kind of exposure with $50,000 in the example he described.

The Cardano Foundation was an anchor investor in MembersCap’s MCM Fund I, which offers qualified investors tokenized exposure to reinsurance. Cardano is one of several blockchains the fund supports, and Hannover Re is among the institutions supporting it. The Foundation said a transaction involving the fund was the first recorded through London Stock Exchange Group’s Digital Markets Infrastructure.

The fund’s eligibility requirement illustrates where identity comes in. Gregaard described linking identity information held off-chain to rules enforced on-chain. A Legal Entity Identifier, or LEI, identifies an organization. A verifiable LEI can also verify the role of a person acting on that organization’s behalf. For an issuer, those are separate checks when a company invests through an authorized representative.

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How Veridian put Cardano’s standard to work

The Cardano Foundation confirmed in October that Veridian, the independent company spun out of its digital identity team, had tokenized its shares using CIP-0113. Gregaard put the number at 850,000 shares in the interview. Switzerland’s Capital Markets and Technology Association recognized the CIP-0113 implementation as equivalent to its CMTAT smart contract standard for certification purposes.

In Veridian’s case, Cardano can enforce the rules governing who receives a share when it changes hands. What that shareholder can claim from Veridian follows from the terms of the share issuance and the law that governs it.