With over 17 years of both residential and commercial real estate experience, the tokenization of real estate is especially exciting application for blockchain technology for me. By tokenizing real estate through blockchain/crypto, an illiquid asset becomes liquid. Real Estate is just the beginning. Other illiquid assets can be tokenized. What is the tokenization of real estate?
Tokenization is the process of creating a platform that creates a fractional ownership interest in an asset using a blockchain technology. With that technology, a security token is created. That blockchain further creates a marketplace for the buying and selling of that token. Blockchain technology offers an immutable record of all transactions.
The token that is issued is considered a security token since it is backed by a hard asset.A security token can represent ownership in an underlying asset, equity in a legal structure that owns the asset, an interest in debt secured by real estate, or a stream of income based on the cash flows of an asset.
Like a preferred stock, value of the token is derived from these 3 principles: will the token include voting rights, dividend appreciation or profit share, will the token represent a digital right, earnings, or/and currency, the token reinforces its’ economic creation and distribution benefits.Security tokens are subject to regulations under Regulation D of the Security and Exchange laws. There are various exemptions under Regulation D.The tokenization of real estate has been successfully created and managed. Recently, The St. Regis, Aspen successfully raised a portion of its’ raise through a security token offering.