RECENTLY, an international client in the financial sector asked for my views on tokenisation of the monetary system. The question struck me as timely, because what once seemed like an abstract idea in blockchain circles is now rapidly moving into the mainstream of global finance.
In recent years, the financial world has been abuzz with the idea of tokenisation. To many, it sounds like another piece of jargon from the tech industry. But behind the buzz lies a profound shift in how we may come to understand and use money itself. Tokenisation is not just about cryptocurrencies like Bitcoin or Ethereum – it is about reimagining money and financial assets as programmable, tradable tokens that can move instantly across digital networks.
As a lawyer, I cannot ignore the fact that tokenisation does not only change economics and finance. It also compels us to rethink the legal architecture that underpins monetary systems: property rights, contract law, consumer protection, banking regulation, taxation, even constitutional questions about state sovereignty over money.
What is tokenisation?
At its core, tokenisation refers to the process of converting an asset – whether it be money, bonds, property, or even art – into a digital token that exists on a blockchain or distributed ledger. These tokens are secure, verifiable, and transferable without the need for traditional intermediaries like banks or clearing houses.
In the case of money, tokenisation means that national currencies could exist not just as paper notes or digital entries in bank accounts but also as tokens that can be moved instantly, peer-to-peer, much like sending a text message. Unlike today’s bank transfers, which pass through multiple intermediaries, tokenised transfers are instant and final, because the token itself is the unit of value.
A legal earthquake
If tokenised money takes off, our legal system will face challenges on several fronts:
1. Regulation of issuers and platforms
Who is allowed to issue tokenised money? Only the central bank? Commercial banks? Or private companies? Current banking and securities laws were not written with tokenised instruments in mind. A new legal category may be required.
2. Contract law and smart contracts
Tokenised money often comes with “programmability” – payments tied to coded conditions. But what happens when a smart contract malfunctions, or executes unjustly? Courts will have to decide whether to enforce code as law, or allow equitable remedies.
3. Property and insolvency
If someone holds tokenised money through a digital wallet provider that later goes bankrupt, is the tokenised asset theirs, or part of the insolvent estate? This raises new questions of trust law and custody rights.
4. Privacy and surveillance
Tokenisation enables unprecedented traceability. While this helps combat fraud and money laundering, it also raises concerns about financial privacy and constitutional protections against state overreach.
5. Jurisdiction and crossborder disputes
A tokenised dollar can move across borders instantly. But which country’s laws govern the transaction? How do regulators enforce their rules when the system is borderless?
6. Monetary sovereignty
If private players issue widely used tokenised currencies, national governments risk losing control over monetary policy – a challenge that goes beyond economics into constitutional law and sovereignty.
In other words, tokenisation is not just a technological leap; it is a legal earthquake. Its benefits include greater efficiency and speed through real-time, low-cost transactions, expanded financial inclusion for the unbanked via smartphones, improved transparency and security through immutable blockchain records, programmability that allows aid or subsidies to be distributed with precision, and the democratisation of assets by enabling fractional ownership of property, shares, or commodities.
Yet the risks are equally significant: volatility if tokens are linked to cryptocurrencies, cybersecurity threats from hacks and thefts, privacy concerns as traceability can fuel surveillance, regulatory gaps that demand new legislation, and the disruption of traditional banking with consequences for credit creation and economic stability.
Who has done it?
Several countries are already testing tokenised national currencies. China leads with its digital yuan (e-CNY), piloted in dozens of cities. The Bahamas launched the Sand Dollar, the first nationwide central bank digital currency (CBDC). Nigeria rolled out the eNaira, though uptake is slow. Sweden’s e-krona explores life beyond cash, while the EU and US are cautiously studying digital euro and dollar models. These examples show tokenisation is no longer theory – it is already reshaping money.
The road ahead
I see tokenisation as potentially as transformative as the shift from gold to paper or from cash to online banking. It offers efficiency and inclusion but also risks surveillance, inequality, and systemic shocks. For Malaysia, the issue is not if but how: do we create a tokenised ringgit under Bank Negara, amend current laws, or draft new ones entirely? The real challenge is balancing innovation with the rule of law, individual rights, and sovereignty.
To me, tokenisation is both a technological revolution and a legal reckoning. Done well, it can democratise finance; done badly, it could erode freedoms and empower new monopolies. My own concern lies in the very real risks of hacking, digital manipulation, and excessive state control over citizens’ financial lives.
As a lawyer, I remind myself that money is not just currency – it is law in action. Every coin, note, or digital entry rests on legal trust. The real test ahead is whether our legal systems can keep pace with money that has become programmable code, while still protecting the dignity and liberty of citizens.
Senior lawyer Dato Sri Dr Jahaberdeen Mohamed Yunoos is the founder and chairman of Yayasan Rapera, an NGO that promotes compassionate thinking among Malaysians. The views expressed here are entirely the writer’s own.