The Hague Conference on Private International Law (HCCH) has launched a project focusing on digital asset tokenization to provide legal clarity for cross-border businesses operating with digital assets. The project will cover various types of digital tokens and address preliminary legal issues related to digital securities and blockchain-based digital asset management. The goal is to determine which laws apply to cross-border businesses and how legal decisions can be enforced internationally. A proposal has been made for the Council on General Affairs and Policy (CGAP) to conduct a study on the private international law implications of digital tokens, excluding securities, central bank digital currencies, and carbon credits, which are already being considered separately.
The study aims to produce a report with recommendations for future actions to be presented to the CGAP in 2025. The project will involve collaborating with specialists and external observers, with member nominations for relevant experts such as legal and technical professionals in digital tokens and experts with experience in national digital token initiatives. Following the adoption of digital asset principles in 2023, the HCCH worked with the International Institute for the Unification of Private Law (UNIDROIT) on a joint project to identify areas for future work, including the application of existing custody rules beyond traditional custody and exploring the legal implications of tokenized assets known as “linked assets.”
The project on digital asset tokenization reflects a growing interest in the potential of tokenization among established financial institutions. Moody’s has noted a significant increase in the value of tokenized funds, driven by US treasury tokenization, while Bank of America predicts that tokenization will bring transformations to financial and non-financial markets in the coming years. The project aims to address legal challenges faced by businesses operating with digital tokens internationally, paving the way for clearer legal frameworks and enforcement mechanisms. The participation of specialists and experts in the project will ensure a comprehensive analysis of various digital token types and their implications.
In light of the increasing adoption of digital assets and blockchain technology, the HCCH’s project on tokenization is timely and crucial for businesses engaging in cross-border transactions involving digital assets. By clarifying legal questions surrounding digital tokens, the project seeks to create a more transparent and predictable legal environment for businesses operating in the digital asset space. The collaboration with UNIDROIT and the involvement of relevant experts will contribute to a comprehensive and thorough exploration of the legal implications of tokenization and its impact on the global financial landscape.
Through the proposed study on private international law challenges of digital tokens, the CGAP will have a comprehensive report with recommendations for future actions, which can help guide policymakers and businesses in navigating the legal complexities associated with digital asset tokenization. As the value of tokenized funds continues to rise and financial institutions show increasing interest in tokenization, the project’s findings and recommendations are likely to have a significant impact on the future of digital asset management and cross-border transactions. Overall, the HCCH’s project on digital asset tokenization represents a step forward in addressing legal challenges and promoting international cooperation in the evolving digital economy.
