Today, much of the financial system runs on layers of ledgers: fund administrator records, custodian records, transfer agent records, depository records, clearing systems and settlement systems. Each works, but reconciliation between them creates time, cost and operational risk. That work is often manual, and when it has been automated, it has come at the cost of greater counterparty risk.
So, what if the ownership record could be shared, updated and verified closer to real time, with lower counterparty risk? That is the question tokenisation and blockchain technology can answer.
What tokenisation is
At its simplest, tokenisation is the process of representing an asset – or the ownership rights attached to it – as code. That code takes the form of a token, recorded on a shared ledger: a database that is not owned or controlled by a single institution, and where ownership can be verified by the participants who use it.
The asset being tokenised could be a money market fund, a bond, an equity, a fund unit, a limited partnership interest, or, eventually, a much wider range of financial claims – even something as specific as a single coupon payment within a loan's future cash flows.
The important point is that tokenisation does not change the underlying asset. It changes the way ownership of that asset is recorded, transferred and used.
Three changes follow
A new record of ownership
The blockchain itself becomes the ownership record, one that participants can independently inspect and verify. Each transaction is cryptographically signed, time-stamped and added to the chain, becoming part of a tamper-resistant history. Participants do not simply take someone else's spreadsheet on trust; they verify the record for themselves. That is where the safety benefit comes from: a common, auditable source of truth – who owns what, when it moved, and under what rules.
Settlement
In traditional markets, a transaction and its final settlement are usually separate events. We trade, then we settle. Tokenisation can compress that gap. In some settings, the transfer of the asset and the cash leg can become near-simultaneous, sometimes described as atomic settlement. Done correctly, this can reduce risk, free up capital and enable faster, more reliable ownership updates.
Programmability
This is where tokenisation becomes more than a digital wrapper. Rules can be embedded into the asset or the market infrastructure around it: eligibility rules, transfer restrictions, collateral rules, distribution mechanics, corporate actions and compliance checks.
An interoperable financial system
The Bank for International Settlements has described tokenisation as having significant potential when tokenised money and tokenised assets can sit on shared infrastructure, enabling transactions to be integrated rather than processed through disconnected silos.
That is the prize: an interoperable financial system. One where money, assets, ownership records and transaction logic work together, rather than around each other. A world where assets are not discretely bucketed but can talk to each other.
This is why century-old institutions such as Baillie Gifford are embracing this technology.
This is not the ‘move fast and break finance’ of the first wave of crypto. It is something different: the ‘adopt and improve’ phase, in which the worlds of traditional finance and on-chain finance are not colliding but collaborating. Innovation is not at the margins; it is rebuilding core market infrastructure for the better.
Safer, faster and programmable.
Risk factors
The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication was produced and approved in May 2026 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
Potential for Profit and Loss
All investment strategies have the potential for profit and loss, your or your clients’ capital may be at risk. Past performance is not a guide to future returns.
This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.
All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.
The images used in this communication are for illustrative purposes only.
196532 10063089
