A single digital token can fall under both payment services and capital markets rules, raising the prospect of overlapping regulation. The question is becoming more pressing as stablecoins, tokenised securities, digital bonds, and blockchain-based settlement find practical uses across financial markets. Their intangible, programmable, and borderless nature complicates how regulators govern them.
Regulators, legal experts, and financial executives examined that problem at TechLaw.Fest 2026 in the panel “Regulating the Invisible: Law in the World of Digital Assets, Blockchain and Cryptocurrency”.
John Ho, Head of Legal, Global Markets, at Standard Chartered Bank, said demand for digital assets was difficult to ignore, in part because they can be accessed in real time, around the clock.
“Last year, the number of blockchain-based payment transactions exceeded the combined average transaction volume of Mastercard and Visa. The amount of stablecoins minted and in circulation has also exceeded 300 billion. Closer to home, the Hong Kong Monetary Authority has issued more than HK$10 billion in digital bonds,” he said.
Legal concerns
One concern raised during the panel was how to regulate an asset that does not fit neatly into established legal categories. The Monetary Authority of Singapore (MAS) approaches financial products without making the technology used the deciding factor.
“We look at new products in terms of their economic substance, legal rights, and functions, regardless of the technology used. For digital asset tokens, those factors help us identify the token’s characteristics and determine which rules apply,” said Paul Yuen, General Counsel at MAS.
Yuen said the same activity and risk should lead to the same regulatory outcome. Tokenisation and blockchain, however, can combine activities that previously fell into separate categories. A single digital product may therefore come under both capital markets and payment services regulation, raising the possibility of overlapping requirements.
“We identify whether the same rules are needed or whether some requirements can be streamlined. That is why we need to keep reviewing the parameters,” he added.
Ho likewise argued that regulators and lawyers should examine what a digital asset does rather than rely on its label.
“We need to look at the substance. If it behaves like a duck and walks like a duck, it should be treated like a duck. Take a digital coin: Does it fall under payment regulations? Is it a capital markets product? Should it be governed by the Securities and Futures Act?” he asked.
Classification matters because licensing and other legal consequences generally follow once an asset is placed in a category, Ho said. The importance of classification is evident in the regulation of smart contracts, which are becoming more complex.
“Some smart contracts are embedded in a token and tied to an agreement between two parties. At the other extreme, there is only code, with no natural-language agreement. If the code is law, how do you regulate it?” he asked.
Ho argued that regulation needs to focus on activities rather than only on the entities involved.
“We can’t rely on a label because the activity can change. What starts as a utility token can quickly be used for payments, as we have seen with some tokens being developed. Lawyers and policymakers need to look at the substance, not the label,” he said.
Property or not?
The panel also considered the legal status of blockchain-based instruments in property law and asset recovery.
Leow Jiamin, Co-author of “Foundations of Cybersecurity Law in Singapore” for the Singapore Academy of Law, said the debate over whether blockchain-based digital assets can constitute property has largely been settled.
“Most jurisdictions have concluded that they are property,” she pointed out.
That status matters because property rights can provide remedies including proprietary injunctions, freezing orders, and disclosure orders. These can help parties trace and recover stolen or misappropriated assets.
Tokenisation raises a further question: a token may represent an underlying asset without being the asset itself. Dr Scott Farrell, Member of the International Jurisdiction Taskforce, described the issue as one of terminology and legal interpretation.
“One of the critical distinctions is between promises, property, and processes. We thought we had dealt with this 15 years ago. As lawyers, we knew the distinction, and then processes became property,” he said.
The distinction is particularly important for tokenised real-world assets. Lawyers must establish the relationship between a token and its underlying asset before determining the rights involved, including those relevant to securities, insolvency, ownership, and enforcement across borders.
Leow pointed to stablecoins as a particular difficulty. Because they are fungible, tracing them can be harder; whether they function as bearer instruments can also affect how ownership is determined.
“The point of a proprietary claim is that you don’t have to compete with general creditors if something fails,” she said.
Future of regulation
As stablecoins and tokenised assets see wider use, regulators also need to consider whether they could create new channels for systemic risk.
Masaki Bessho, Deputy Director-General for Digital Currency, Payment and Settlement Systems Department at the Bank of Japan, said round-the-clock digital asset networks could transmit financial stress more quickly.
Bessho warned that liquidity strains and payment disruptions could spill over into short-term funding markets. Central banks’ surveillance and other frameworks “must evolve alongside the development of digital assets,” he said.
Bessho argued for supporting technological development while containing emerging risks. He said central bank tools and analytical approaches should reflect the scale of digital asset adoption, the significance of the risks involved, and the characteristics of the blockchain being used.
The discussion then turned to whether regulatory convergence requires jurisdictions to adopt identical rules.
Farrell argued that regulators should focus less on producing identical frameworks and more on achieving compatible outcomes.
The goal, he suggested, was to allow businesses and financial markets to operate safely across borders without introducing unacceptable risks.
“We shouldn’t be seeking an outcome of perfect alignment. We don’t have that in the financial markets anyway,” he said.
Ho also raised the convergence of AI, smart contracts, and programmable payments as a question for lawyers.
“Amazon has introduced agentic commerce in the US, allowing agents to make an entire grocery purchase based on a customer’s behaviour without the customer working through every step. AI and blockchain can also provide verifiable records and round-the-clock programmable payments. Lawyers need to ask where the contract is, who is accountable, and who is liable,” Ho said.