Finance
Tokenized futures: a new path for agricultural financing
By Avocate ·
Futures contracts let a grower fix today the price of a harvest that will be sold months from now. Tokenizing them means representing them on a distributed ledger, which can make them cheaper to manage and bring them within reach of producers who cannot use them today. This article explains what an agricultural future is, what changes when it is tokenized and which legal framework applies in Spain and the European Union.
What is an agricultural futures contract?
An agricultural futures contract is an agreement to buy or sell a specific quantity of an agricultural product at a price fixed today, for delivery on a future date. Spain’s securities regulator, the CNMV, defines a future as a forward contract traded on an organised market with standardised terms, and notes that its underlying asset can be a commodity, including agricultural products.
For a grower, the main benefit is hedging: by fixing the price before the harvest, a later fall in the market does not affect them. In exchange, they give up the chance to benefit from a price rise.
Why do small farmers struggle to get financing?
Small farmers struggle to get financing because they have little scale, few guarantees and an income record that banks see as risky. The International Fund for Agricultural Development (IFAD) estimates that the financing needs of around 270 million smallholder farmers in sub-Saharan Africa, South and South-East Asia and Latin America exceed USD 200 billion.
These farms carry enormous weight. According to FAO, there are more than 570 million farms in the world, and those smaller than one hectare make up 72 percent of the total while controlling only 8 percent of agricultural land. FAO itself notes that these are orders of magnitude rather than exact figures.
What does it mean to tokenize a future?
Tokenizing a future means representing the contract as a digital asset on a distributed ledger, so that its issuance, ownership and transfer are recorded on that ledger. The potential advantage is operational: faster settlement, a ledger shared between the parties and the option to split a contract into smaller fractions.
Tokenization does not change the legal nature of the contract. Article 2.2 of Spain’s Securities Markets Law (Law 6/2023) states that financial instruments remain financial instruments when they are issued, recorded, transferred or stored using distributed ledger technology, and commodity futures are among those instruments.
What does Spanish law say?
Spanish law has recognised since 2023 that securities can be represented using distributed ledger technology. Article 6 of Law 6/2023 allows transferable securities to be represented by book entries, certificates or systems based on that technology, and requires those systems to guarantee the integrity and immutability of the issues.
Article 11 of the same law adds that these securities are transferred by means of the transfer recorded on the distributed ledger itself. In other words, the ledger stops being an informative record and acquires legal effect.
What does European law say?
European law distinguishes between crypto-assets and financial instruments, and a tokenized future falls on the side of the latter. Regulation (EU) 2023/1114, known as MiCA, governs the offering and trading of crypto-assets and has applied in general since 30 December 2024. Its Article 2.4 expressly excludes crypto-assets that qualify as financial instruments.
Financial instruments have a different route: the pilot regime for market infrastructures based on distributed ledger technology, Regulation (EU) 2022/858, which has applied since 23 March 2023. Under its Article 3, it admits shares, bonds and units in funds, subject to size limits. Derivatives are not on that list.
Which risks should be taken into account?
The main risk is mistaking the technology for legal protection. A tokenized future is still a derivative, with the same authorisation and supervision requirements as any other financial instrument, and whoever offers it must comply with those rules.
- Market risk: a future can produce losses if the price moves against the position.
- Regulatory risk: the European framework for these instruments is still taking shape.
- Technology risk: failures in the ledger or in smart contracts have real economic consequences.
How does Avocate approach it?
Avocate sees tokenized futures and crowdfunding as ways for agricultural producers to access capital. The project is developing its minimum viable product with the aim of complying with Spanish and European legislation on the tokenization of real-world assets.
This article is for information only and does not constitute financial or legal advice. Any investment in financial instruments carries a risk of loss.