Security token adoption continues to rise as the integration of regulations enables for more inclusion on the blockchain. While security tokens that function as rights to ownership in company profits, or the decision-making process are popular, there is another asset class that is quickly becoming digitized – real estate.
Utility Tokens Lacked the Legal Infrastructure
Transferring property rights is a complex process that requires both sellers and buyers to adhere to strict guidelines. Security tokens integrate these requirements directly into the coding of the token via smart contracts. Anti-money laundering (AML) and combating Terrorism funding (CTF) are two primary regulations that must be met.
It makes sense to digitize real estate for a number of reasons. In most regions of the world, property record keeping is a complex procedure which is often prone to failure and fraud. Blockchain technology eliminates many of these concerns by the manner in which the technology functions.
Security Token Real Estate Platforms
Platforms such as San Francisco-based Harbor enable crowdfunding of real estate properties. The company regularly hosts security token offerings (STO) for investors. Harbor specializes in private securities. Aside from real estate, this includes items such as company equity, investment funds, fine art.
Harbor received national media attention after the co-founder of PayPal, David Sacks, took the position as chairmen for the firm. In addition to Sacks, the company recruited Josh Stein
STOs are similar to ICOs in many aspects. However, they do require all participants to follow securities guidelines. These guidelines cover the issuance, management, and transference of security tokens. In the case of real estate security tokens, there are additional local and international regulations to be met.
Harbor isn’t alone in their desire to usher in the digital revolution. In September, BlockEstate partnered with Polymath and ComplyAPI to raise $50 million in funding for the development of a security token platform. The platform incorporates predictive analysis to manage and invest real estate capital more efficiently.
Advantages of Tokenized Real Estate
Tokenized properties can be transferred at a much cheaper rate when compared to traditional means of property transference. One of the main reasons for these cost savings is that tokenized real estate doesn’t require the use of third-party verification systems. Additionally, the ownership rights are immutable once on the blockchain.
Another huge advantage gained by tokenizing real estate is the ability to micro-fund projects. Blockchain technology eliminates much of the overhead associated with traditional fundraising strategies. Blockchain tech allows more investors to participate with less capital.
Investors can now spread their capital across multiple platforms as opposed to purchasing a property personally or via a corporation. For example, an investor with $100,000 to invest may decide that their ROI will be better if they put $20,000 into five different properties versus one. All this and more is possible thanks to the tokenization of the real estate market.
The Future is Digital
The archaic methods used in the real estate market are coming to an end as the advantages of blockchain technology are too much to ignore. You can expect to see a flood of new tokenization platforms emerge over the coming year as security tokens continue to reshape the real estate market forever.