Tokenization for investment purposes and for funding

Tokenization for investment purposes and for funding

In this case, tokenization can be illustrated using the example of real estate. A project developer owns a property valued at one million euros. With the help of tokenization, the project developer can now break up this property as small as desired, for example into 10,000 tokens that are issued at 100 euros each. The seller and buyer can trade tokens via the blockchain without intermediaries. The administration is done digitally.

The project developer issues tokens and receives the capital. The buyers acquire tokens and thus hold a piece of the property. At the same time, the token is evidenced with rights: its holder, for example, claims a proportion of rental income.

Duties are also stored: for example, participation in property tax, repairs or insurance. The token holder can also sell his token on the secondary market at any time. That – buying, managing, selling – is done automatically and digitally.

In this way, decentralized crypto exchanges can be applied to practically all ownership structures, assets and rights. Here it can be used:

Decentralized Crypto Exchanges

Asset Token

Real estate, savings accounts, precious metals, art (NFT), intangible assets such as patents, copyrights and trademarks

Debt Token

A debt claim for repayment of the amount invested with or without interest. For example, an owner can tokenize part of her home. For the money collected, it can pay the investor interest.

Bonds, loans, debentures

Equity Token (participation rights)

Rights to are tokenized with the allocation of shares and voting rights.

Funds, stocks and futures (futures contracts on a specific good)

Ideal picture: tokenization of the economy

The real estate example shown is the ideal picture of how tokenization can work. To ensure this, the entire economy would have to be based on blockchain technology. All actors interact in the same decentralized network, control each other and use it to conduct their business.

In the case of real estate, this means: The land register is mapped on the blockchain, tax payments are made using the blockchain and insurance companies use them.

There is still a long way to go before then. Critics say that the tokenization of assets currently “only” works via an intermediary structure. A platform is interposed to bring issuers and investors together.

In concrete terms, this meant that it was not the property itself that was tokenized, but rather a profit participation right, a security or a bond.

Investments become tradable securities

At the regulatory level, the legislature differentiates between the  Asset Investment Act for traditional investments such as real estate and the  Securities Prospectus Act for securities.

Whether it is an investment or security depends on properties such as transferability, standardization or suitability for the capital market tokenization changes. The simple handling, transferability and tradability of shares and securities should also be possible with traditional investments using tokens.

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