Not a token gesture: how Guernsey’s framework supports tokenisation

New guidance highlights how Guernsey's regulatory framework offers a clear and practical path forward for promoters to tokenise investments, securities and real-world assets.

The Guernsey Financial Services Commission’s (GFSC) recent Guidance Note on the Tokenisation of Investments and Other Assets in the Bailiwick of Guernsey clarifies the regulatory treatment of tokenised interests in collective investment schemes, securities and real-world assets. For sponsors, issuers and managers, it confirms that Guernsey offers a credible and practical home for tokenisation.

In this briefing, Investment Funds expert Liam Murphy explains the benefits of tokenisation, the key takeaways from the recent Guidance Note published by the GFSC and how Guernsey’s regulatory framework supports digital finance initiatives, including blockchains.

What do we mean by tokenisation?

As per the Guidance Note, tokenisation is the process of converting interests in an asset into digital representations that can be issued, transferred or managed using distributed ledger technology (DLT).

A DLT provides a decentralised method of recording, sharing and synchronising data across multiple computers (or nodes) without a single central authority responsible for the ledger. Entries are signed and timestamped by cryptography and a consensus mechanism (such as "proof of work") allows participants to agree on the state of the ledger. Blockchains are the best-known, but not the only, type of DLT.

Why tokenise funds and other assets?

As the GFSC observes, tokenisation has the potential to reshape how money moves, how assets are traded and settled and how legal contracts in respect of such assets may be concluded.

Potential benefits include:

• faster and more efficient settlement

• potential cost efficiencies and lower transaction costs for investors

• real-time or near real-time record keeping

• the opportunity for extended or 24 / 7 market access

• improved ownership traceability through a single, shared record of transactions

• streamlined disclosure to investors

The GFSC also recognises that automation may support AML / CFT / CPF controls and improve auditability. That our regulator sets out these advantages so clearly is a strong signal of Guernsey’s openness to the technology.

The GFSC’s Guidance Note on tokenisation: key takeaways

Tech-neutral regulation

The GFSC applies the principle of "same activity, same risk, same regulatory outcome". Tokenisation does not change the regulatory expectations that apply to an investment so sponsors can rely on familiar, well-established regimes rather than navigate a separate digital-asset system.

For example, the GFSC confirms that a "token issued solely as a digital representation of an investor's interest in a registered or authorised fund would not constitute a virtual asset under the Lending, Credit and Finance (Bailiwick of Guernsey) Law, 2022".

For more information on the virtual asset service provider (VASP) activity perimeter, read our earlier article:

GFSC response to Consultation on Supporting Growth with Digital Finance: key takeaways

Guernsey’s strong legal and regulatory framework

The GFSC notes that Guernsey's existing laws already support digital finance, and cites the following as examples:

• Electronic transactions: the Electronic Transactions (Guernsey) Law, 2000 and the Electronic Agents Ordinance, 2019 already confirm that contracts formed or executed by computer programs are not denied legal effect, validity, enforceability or admissibility

• Investments regime: the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (the POI Law) permits tokenisation of both Category 1 (funds) and Category 2 (securities and derivatives) controlled investments

• Virtual assets: the Lending, Credit and Finance (Bailiwick of Guernsey) Law, 2022 (the LCF Law) provides a dedicated framework for VASPs

• Financial crime: the GFSC’s Handbook on Countering Financial Crime (AML / CFT / CPF) (the Handbook) has been updated to clearly support electronic verification and digital signatures

Tokenisation in Guernsey: key principles

The Guidance Note makes it clear that certain fundamental principles apply to tokenisation of assets in Guernsey, some of which we highlight below.

No parallel off-chain register is required

Guernsey companies and limited partnerships may keep their registers electronically. Where records are natively issued and maintained on a blockchain, Guernsey law does not require a parallel off-chain register. The only condition is that the register can be reproduced in hard copy or legible form on request. This removes the risk of conflict between two records, enables near real-time record keeping and should reduce duplicate administration / reconciliation costs. Using the DLT as the register should also allow smart contracts to effect legal transfer.

The token is the security

Legal title moves with the token and the on-chain register is evidence of ownership. Investors therefore have clarity over what they own at any given time and where that ownership is recorded.

Flexibility on infrastructure

Registers may be kept on public or private blockchains giving sponsors a breadth of use cases and flexibility of choice in distribution networks. This flexibility runs throughout the Guidance Note.

Defined regulatory perimeter

"Fund tokens" are outside the virtual asset regime. A token that only represents an interest in a registered or authorised fund is not itself a virtual asset attracting additional regulation under the LCF Law.

Prospectus exemptions under the Prospectus Rules and Guidance, 2025 (the Prospectus Rules) are available for offers to professional investors, offers to 200 or fewer non-sophisticated investors, and offers of listed securities. The GFSC also confirms that electronic disclosure can qualify as a prospectus.

Which assets can be tokenised in Guernsey?

Funds

Units, shares and partnership interests in Guernsey authorised or registered funds may be tokenised. Tokenisation sits alongside the existing investment regime. The fund must continue to comply with the POI Law, and its Designated Administrator remains responsible for administering the fund in accordance with all applicable legislation, including the Handbook. This is true whether record-keeping is carried out via DLT or third-party tech providers and this obligation to comply with AML, CFT and CPF laws extends to all service providers to the fund.

Securities

Tokenised securities are a Category 2 controlled investment under the POI Law and are regulated as such. Any person carrying out a restricted activity in connection with a tokenised security in or from within the Bailiwick of Guernsey therefore falls within scope of licensing under the POI Law (but not the LCF Law). The Prospectus Rules apply to offerings of such securities unless an exemption applies. Where a Guernsey undertaking (including a company or a trust) is required to appoint Bailiwick-licensed corporate services provider for a traditional structure, the same applies to the issuance of tokenised securities.

Real-world assets

Real-world assets (RWAs), both tangible and intangible, can be tokenised, including commodities, real estate and financial instruments. As the GFSC notes, tokenisation of RWAs can make them easier to buy, sell and transfer and may be able to improve investor access to less readily available assets including by fractionalising the availability of the asset and making distribution more efficient.

The GFSC’s examples include:

• tokenisation of an asset held by a Guernsey special purpose vehicle (SPV) which issues tokens

• tokens representing a claim that derives its value from an underlying asset

• native or direct tokenisation where a token represents direct ownership of the asset

Direct tokenisation of RWAs may in some cases be subject to the LCF Law if the token is a "virtual asset" for the purposes of the LCF Law. This applies where a token is a digital representation of value that can be digitally traded or transferred and used for payment or investment purposes. Digital representations of fiat currency and Category 2 "controlled investments" are expressly excluded.

Multi-asset tokens

Some tokens are intended to function as digital representations of a claim against a diversified basket of underlying assets. These may be structured using an SPV that holds multiple assets and issues a token conferring a legal or contractual claim against the SPV. Alternatively, tokens are issued that represent a direct interest in the underlying assets themselves.

Where a token is a digital representation of a diversified portfolio that is actively managed, the structure may need to be regulated as a fund. The Guidance Note encourages early engagement with the GFSC to discuss where there is any ambiguity relating to a proposed structure.

Risk management in tokenisation

Investments are always subject to risk and tokenisation will not eliminate risk. Indeed, tokenisation may amplify certain risks or cause risks specific to the processes, technology and infrastructure used. For example, DLT may limit the ability to correct a register to reverse incorrect entries and technology failure could interrupt access to registers and the ability to transfer interests.

The governing body of each fund or security issuer, together with its regulated service providers, remain responsible for maintaining a control framework proportionate to the nature, scale and complexity of the tokenised arrangement. They must be able to demonstrate its effectiveness to the GFSC on request.

Helpfully, the technology itself can be part of the solution. The GFSC highlights smart contracts that restrict transfers to eligible investors who have already been whitelisted, alongside contingency planning for network issues and appropriate oversight of third-party technology providers.

The Guidance Note does not address conflicts between code and constitutional documents. Our suggestion is that the courts are likely to treat the constitutional documents of an issuer (for example its articles of incorporation or relevant limited partnership agreement) as the controlling source of rights. We therefore suggest that sponsors should take care to include the following mechanisms to manage risks:

• a clear hierarchy clause giving the constitutional documents priority over the code

• express powers to freeze, burn and reissue tokens to give effect to court orders and sanctions

• audited code that matches the documents

Risk disclosure

Guernsey's existing framework already requires appropriate risk disclosure, and the Guidance Note confirms that tokenisation introduces no new requirements.

For authorised and registered funds, disclosure rules are unchanged: sponsors must assess which risks are relevant and disclose accordingly. The Guidance Note gives examples of tokenisation-specific risks that may be relevant, including:

• technology

• custody

• wallet and key management

• legal ownership and enforceability

• governance and control

• operational risks

Tokenisation in Guernsey: use cases

Appendix B of the Guidance Note includes illustrative Guernsey use cases, demonstrating the GFSC’s focus on demonstrable real-world deployment.

Use cases within Appendix B include:

• a blockchain-administered private equity fund offering “one version of the truth” to managers and investors

• a technology company raising capital by issuing tokenised shares

• a Guernsey SPV issuing tokens linked to listed shares or to gold

• tokenised bonds and equities used for faster collateral settlement

• a tokenised structured product that bridges on-chain capital with traditional financial structures

Why Guernsey for tokenisation?

The GFSC is an unusually engaged and approachable regulator. We see this time and again in practice, most recently in Guernsey's Fund Foundry initiative. This accelerator programme attracted applications from more than a hundred emerging managers and received emphatic support from the island’s regulator.

The GFSC continues to encourage early dialogue on novel structures, including direct tokenisation and multi-asset tokens and has revamped its Sandbox and Concierge offering to facilitate novel structuring, including in digital finance. Guernsey also combines legal certainty for electronic contracts and on-chain registers, alongside regulation that treats tokenised and traditional investments alike.

The GFSC recognises the efficiency, transparency and access benefits tokenisation can bring and its framework gives sponsors the certainty to tokenise fund interests, securities and real-world assets with confidence. Guernsey is open for digital finance business and, in our view, is building a best-in-class, well-regulated environment for market participants.

What’s next?

The Guidance Note specifically excludes stablecoins, detailed guidance on which the GFSC plans to publish during "autumn 2026". We, like other market participants, are eager to see how Guernsey’s regulator plans to incentivise the issuance of licensed stablecoins in the jurisdiction.

How Ogier’s Investment Funds team supports on digital finance

From crypto natives to traditional fund managers and VC firms, we provide commercial advice on virtual assets funds tailored to our clients’ needs.

We support managers launching funds to invest directly or indirectly in digital assets and provide full lifecycle support on structuring and associated regulatory matters.

Contact our team to learn more.

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice