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Commercial Real Estate Security Tokens Expected to be a Big Fintech Trend

It’s common knowledge that blockchain and cryptocurrency have already disrupted so many industries, including healthcare, legal industries, security, and retail. The big news is how blockchain-powered platforms like blockimmo facilitate an accessible and streamlined real estate market. Blockimmo lead developer Michael Dietz describes blockimmo to Medium as a secure and simple platform for buying, selling, and investing in Swiss real estate. Two of its primary purposes are the sale of commercial investment properties and financing the development of projects. Properties that will be included are usually owned by investors with varying shares.

In relation to these innovations, experts believe 2019 could be the year security tokens finally take off. It’s likely that it will be possible to buy a ‘share’ of a particular property and ownership would be represented by a token. This means buyers become part owners of the company, which allows them to share in the profits and dividends. Security Token Academy created the initiative called Commercial Real Estate Security Tokens or CREST to turn this idea into reality. Crowd Fund Insider reports that taking a hard asset class as a real estate property and tokenising it has become a hot topic in the digital asset sector.

In the past, if you wanted to buy a share in a real estate property, you had to enter into real estate investment trusts or invest in real estate mutual funds. These are great options, but they can be expensive because of realtors and mortgage brokers. In fact, here in London, there are very few new-build help-to-buy flats available. To make matters worse, The Guardian reveals that you need a budget of £170,000 to be able to afford more than the minimum share in a shared ownership property. This is not an isolated case, as other cities with high value real estate are more or less the same. Across the pond, a post by Yoreevo notes that transaction costs in New York City can range from a few thousand dollars to over 5%. Payments for the middlemen who handle the transactions and paperwork often increase the cost of property. Tokenising real estate investments cut the extra costs and makes it more affordable for anyone to make an investment.

The St. Regis Aspen Resort in Colorado, for one, is proof that the industry can be tokenised. The company, valued at $224 million (£173.87 million), was able to raise $18 million (£13.97 million) in tokenised securities. St. Regis isn’t the only property that has been successfully tokenised, either. Local asset management company NDP was able to successfully tokenise an underground garage parking space in Technology Park Ljubljana in Slovenia. The minimum viable property attracted small investors from around the world.

Of course, it’s worth mentioning that this method of investing in real estate is not entirely new. Real estate investment trusts, which are like mutual funds for property investments, have been around since the 1960s. There are several platforms available, like Harbor that can help investors market digital securities. Harbor CEO Josh Stein spoke to Breaker Mag and said that the idea of Harbor came from the drive to solve the compliance challenge to create an initial coin offering that is legal and leans on blockchain. “All property is a potential target. What if you could solve the compliance challenge and do a legal ICO on the blockchain?” he said.

Apart from whether or not investors should put money in real estate tokens, there’s also the uncertainty when it comes to how new technologies like these will be regulated. The Fintech Times previously discussed how fast-moving technological changes and innovations have left regulators, and policymakers wondering where they should start when it comes to creating applicable laws. Although things are still uncertain, experts and investors remain hopeful and excited to see how the cryptocurrency market will mature and how lawmakers will handle these new evolutions in technology.

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