Real estate is valuable but hard to divide and slow to trade. Tokenization is one approach to changing that, by representing rights in a property as digital tokens recorded on a blockchain.
How it works
A legal structure is set up to hold a property or an interest in it. Digital tokens are then issued that represent defined rights, such as a share of ownership or of rental income. Transfers of those tokens are recorded on a blockchain.
Potential benefits
- Smaller investment sizes: a property can be divided into many units.
- Transparency: transactions can be recorded on a shared ledger.
- Efficiency: some administrative steps may become faster and more automated.
What to consider
- Legal rights: what exactly does a token give you, and is it enforceable where you live?
- Regulation: rules for tokenized assets differ by country and are still developing.
- Liquidity: there may be few buyers when you want to sell.
- Trust in the parties: valuation, property management and record-keeping still depend on people and companies.
Tokenization is promising, but the legal structure matters as much as the technology. Understand the rights and risks before you take part.
Explore our Real Estate Tokenization advisory service.
This article is for general information and awareness only. It is not financial, investment, legal or tax advice. See our Financial / Investment Disclaimer.