Plain English
A security token is a tokenized regulated security — equity in a company, debt, real estate, or fund interest — issued on a blockchain. Unlike utility tokens, security tokens are explicitly within securities law: registration, accredited-investor rules, custody requirements, transfer restrictions all apply.
How it actually works
Issuance happens through a regulated platform (Securitize, Backed Finance, Tokeny, Polymath) that handles KYC, transfer agent functions, and compliance enforcement at the smart-contract level. Many security tokens use ERC-3643 (T-REX) or similar permissioned standards that block transfers to wallets that have not passed KYC.
What it means for you
For HNW principals and family offices, security tokens are how tokenized treasuries (Ondo, BlackRock BUIDL), tokenized equities (Backed, Dinari), and tokenized funds reach the market. Settlement is instant, custody is your own wallet, but the regulatory layer is full traditional securities law. Plan accordingly with your CPA and counsel.
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Educational content only. Not investment, tax, or legal advice.