It's a very good article, and I do agree on most points. The legal part however is focused on the US market, and every country has its own peculiarities and complications.
For example one of the first countries where a property has been effectively tokenised is Slovenia. The guys at Blocksquare have successfully put a parking space on the ERC20 blockchain and the tokens are currently being traded on their platform (with very low liquidity though, this problem is still to be solved). However according to their regulators this kind of token is not a security so this eases the process quite a bit, and it seems like in most other countries this will not be the case.
Topic: Deep dive into real estate tokenization including regulatory/legal concerns (Read 186 times)
June 04, 2019, 05:29:12 AM
April 25, 2019, 05:49:25 PM
It's an interesting concept for sure. I remember Jackg raising something similar.
I still think that there are issues in terms of how this is going to work internationally, if a loan does enter default status, who is the person that is going to take that collateral which is the real estate itself and liquidate it? If investors holding the token are all overseas, that is.
Also, who these tokens can be offered to as an investment also needs to be considered from a country standpoint. Different countries obviously have different securities regulations.
I do struggle to see an exchange for these tokens developing with sufficient liquidity, though a platform like that itself is obviously possible from a conceptual standpoint. Practically though, the orderbooks will most likely be quite empty for each token, since they're not necessarily fungible with one another even with the same interest rates.
I still think that there are issues in terms of how this is going to work internationally, if a loan does enter default status, who is the person that is going to take that collateral which is the real estate itself and liquidate it? If investors holding the token are all overseas, that is.
Also, who these tokens can be offered to as an investment also needs to be considered from a country standpoint. Different countries obviously have different securities regulations.
I do struggle to see an exchange for these tokens developing with sufficient liquidity, though a platform like that itself is obviously possible from a conceptual standpoint. Practically though, the orderbooks will most likely be quite empty for each token, since they're not necessarily fungible with one another even with the same interest rates.
April 22, 2019, 07:26:35 PM
The challenges on the regulatory side is that who will be the registered owner on regulatory's records of the tokenized property.
The fact that these tokenized real estate are own by multiple persons and/or companies, will it be considered as a partnership organization?
It would be easily to regulate on the Government side if they acknowledge it as a partnership. Then the taxation and legality treatment
will be followed on the partnership organization.
The fact that these tokenized real estate are own by multiple persons and/or companies, will it be considered as a partnership organization?
It would be easily to regulate on the Government side if they acknowledge it as a partnership. Then the taxation and legality treatment
will be followed on the partnership organization.
The tax implications and other issues regarding structure are certainly important, but the big regulatory concern in the US is really regarding securities law and trading of the tokens. That's the biggest hurdle as it really decreases liquidity and essentially kills the main advantage of tokenization (which would be democratized access to real estate investments). If you look at crowdfunding in the US via regulation-CF you'll see how the US efforts to introduce new ways for startups to raise money have failed. There's so much red tape and regulation that even though someone might be able to become an investor in an early stage startup and invest as little as say $100, it's literally a more complicated process than getting a mortgage (you basically have to go through a type of KYC, provide your social security number, income, multiple disclosures on risk, etc). And that's not even considering the difficulties reg-cf portals have with escrow and accepting different types of funding as that's more or less solved by using crypto.
April 21, 2019, 07:18:04 AM
The challenges on the regulatory side is that who will be the registered owner on regulatory's records of the tokenized property.
The fact that these tokenized real estate are own by multiple persons and/or companies, will it be considered as a partnership organization?
It would be easily to regulate on the Government side if they acknowledge it as a partnership. Then the taxation and legality treatment
will be followed on the partnership organization.
If you live in the US I think its more appropriate to tag that type of formation as a partnership. Then the government shall apply the laws for the partnership with regards to the taxing, registration and/or licensing if required. The fact that these tokenized real estate are own by multiple persons and/or companies, will it be considered as a partnership organization?
It would be easily to regulate on the Government side if they acknowledge it as a partnership. Then the taxation and legality treatment
will be followed on the partnership organization.
April 17, 2019, 12:51:47 AM
The challenges on the regulatory side is that who will be the registered owner on regulatory's records of the tokenized property.
The fact that these tokenized real estate are own by multiple persons and/or companies, will it be considered as a partnership organization?
It would be easily to regulate on the Government side if they acknowledge it as a partnership. Then the taxation and legality treatment
will be followed on the partnership organization.
The fact that these tokenized real estate are own by multiple persons and/or companies, will it be considered as a partnership organization?
It would be easily to regulate on the Government side if they acknowledge it as a partnership. Then the taxation and legality treatment
will be followed on the partnership organization.
March 27, 2019, 07:09:13 AM
There are so many potential uses being held back by regulations.
March 26, 2019, 12:16:29 PM
Our founder recently wrote an in-depth article on tokenized real estate. This is useful to anyone interested in better understanding the challenges involved with tokenizing real estate, specifically the legal and regulatory concerns. The article also briefly explores the idea of real estate based loans on blockchain, which present a fantastic use case, and possibly alleviate many of the regulatory concerns as debt notes can be easier to structure in a way as to not have them deemed securities.
https://propertyclub.nyc/article/real-estate-tokenization
https://propertyclub.nyc/article/real-estate-tokenization
Awesome, I was looking for that kind of information.
That is a important issue to be concerned. That's a great market over blockchain in real state.
March 25, 2019, 07:00:10 PM
Our founder recently wrote an in-depth article on tokenized real estate. This is useful to anyone interested in better understanding the challenges involved with tokenizing real estate, specifically the legal and regulatory concerns. The article also briefly explores the idea of real estate based loans on blockchain, which present a fantastic use case, and possibly alleviate many of the regulatory concerns as debt notes can be easier to structure in a way as to not have them deemed securities.
https://propertyclub.nyc/article/real-estate-tokenization
https://propertyclub.nyc/article/real-estate-tokenization
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