Technological advances in recent years have focused on such interesting things as building a decentralised network, with immutable and interconnected blockchains. As a result, they have managed to decentralise different aspects of society, from financial activity to the recording of our medical history. Today we are going to talk about tokenisation as it is one of the most revolutionary cases where this industry is being applied.
And within it, we will mention the so-called tokenisation of real estate. What is it? What is it for? How does it work? Is it legal?
We want to tell you about it in a few words, but, afterwards, you can ask us any questions you may have. Let's go!
Meaning of tokenize real estate
tokenising real estate or tokenising assets? Call it what you like, tokenising is still splitting an asset into different parts. However, there are assets that cannot be split, such as a building or a stock. So how do we split it? To do this, we create a digital asset called a token to represent it. The evolution of this concept along with the technology behind it has led us to refer to the world of tokenisation as easy, reliable, transparent and secure.
Now, what do we mean by tokenising real estate?
In Latin American countries such as Argentina, investing in the real estate sector has been a guarantee of value, as it protects against the volatility of the financial market. Over the years and with the development of technology, new alternatives to the total purchase of a property have been created: the tokenisation of real estate assets and closed-end investment funds (FCICs).
Tokenising a property means dividing it into smaller parts that are represented by tokens that have ownership rights. Each of these tokens is digitised to be traded in the online world and stored in the wallet of each investor.
tokens offer globality and transparency!
Tokenisation process of a real estate asset
can it be applied to any tangible or intangible asset? The answer is YES. Intellectual property, shares, works of art, real estate... Anything you can imagine can become a digital asset.
But none of this would be possible without the presence of blockchain technology, given that the tokenisation process works with the registration, traceability and instantaneous transfer that the blockchain allows. Tokens are accounting units that allow for immediacy in operations.
These digital assets are issued on a blockchain and are initially held in the portfolio of the issuer, i.e. the owner of the property. When the owner decides to put them up for sale, funds start to be raised for these assets, a process that can be carried out in two different ways:
- Manually - the issuer sends the digital assets to the buyers when payment is received.
- Throughsmart contracts: The buyer sends cryptocurrencies and the contract automatically transfers the tokens to them.
The process of selling tokens can be done through a public offering, with a licence from the CNMV, or through a private offering. Currently, despite the great role of technology in tokenisation, the bureaucratic side makes it not feasible to tokenise real estate directly.
why is Spain a good scenario for tokenising real estate?
In Spain, the debt necessary to acquire the property is tokenised in such a way that the investors who provide the capital receive tokens that represent the participating loan. As a result, they receive interest on it. In order to make the issue, a prospectus signed by an EAF (broker or financial advisory firm) is required and sent to the CNMV.
We have compiled some characteristics that make Spain an ideal scenario for tokenising real estate:
- The high volume of business in the country's real estate market.
- The level of regulation and bureaucracy in the buying and selling process.
- The marked need to invest.
- The lack of liquidity in investments.
do you think that asset tokenisation is the perfect ally to obtain financing in real estate?
what does the law say about the tokenisation of real estate?
"Hello, I am a token issuer and I commit through a contract to guarantee the interest of investors as one of my top priorities.
what do you mean by this?
"It means that I will maintain the property in an optimal state and maximise the rents.
and what happens if you don't comply with the contract?
"Then those who own the tokens could pursue their rights legally against me. It's not in either of our interests. What's more, the property that is tokenised is insured to be protected against sales, mortgages or even third party action to the blockchain."
how are you so sure about that?
"You see, there is something called tokenisation that provides access to the ownership of some financial instruments. And although this is not included in Spanish law, we must respect the laws on property and mortgage registers. Bear in mind that blockchain technology is still a register".
and do you think that investing in bricks and mortgages will be one of the preferred ways for Spaniards to make the most of their savings in the future?
"Yes, in fact, it already is. Tokenisation makes it possible to optimise investment processes. When you buy a token, you get a proportionate share of the amount invested in that equity loan.
and that entitles you to dividends generated by the management of the property?
"That's right!
And finally..
The great advantage of the process of tokenising a property is that it allows something with a lot of value to be shared between different people and have greater liquidity in the market. If you have bought a property and want to sell it, you have to find a person who has that amount of money. On the other hand, if you have a tenth of the tokens that represent that building, you can find a person much more quickly, given that the amount is smaller.
To this, we must add the presence of DEFI markets, which allow you to create liquidity pools of digital assets so that you can access liquidity at any time, without having to look for buyers on your own.
If you have any doubts about how blockchain technology, tokenisation and real estate work, you are in the right place to resolve them. At Occam Agencia Digital we can help you without obligation.
are you looking for new ways to invest your savings? Would you like to get a long-term return? What do you know about tokenising real estate?
give us a call!
