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YTY
59, rue de Ponthieu, Bureau 562,
75008 – Paris – France
RCS Paris 887 663 201
contact@nfcready.shop

YTY ASSETS, Next Generation Tokenization Agency

YTY ASSETS is the in-house tokenisation agency of YTY. YTY is an operator of ambient intelligence applications and publisher of the REALYTY® smart card.

YTY ASSETS

Next-generation tokenization agency

We liquefy your artworks your buildings, your boats, your classic cars, your shares, your factories, your production machines, your industrial processes, your projects, your services . . . any type of asset, so that you can benefit from automation, cost reduction and transferability. Our agency provides tailor-made solutions thanks to the most powerful cryptographic token modeler to date, capable of adapting to all business models and all existing contexts. Our respect of standards and our technical interconnections ensure the issuance of tokens that can be marketed on all types of second markets.

Why should I choose YTY ASSETS?

Lower costs

YTY Assets enables to drastically speed up processes and reduce costs.

Our solution accelerates all processes related to fundraising and asset management, resulting in significant cost savings. Investor on-boarding - including KYC/AML - is fast and seamless, and advanced automation capabilities significantly speed up settlements and resales.

Compliance and contracts

Build complex compliance workflows and digital contracts

Our platform enables complex compliance workflows by using sophisticated protocols. From the country of the asset to the country of the investor, our protocol allows you to be compliant from end to end. And this compliance model goes even further. YTY Assets is the only platform that allows you to add asset transfer conditions to your shareholders' agreement.

Future-proof

Fully adaptable and based on international industry standards

YTY Assets is the only platform that can stand the test of time. It is blockchain agnostic, able to model complex assets, change compliance rules at any time and uses only technical and industry standards. Customers are not locked into proprietary protocols and can use external secondary markets. Its architecture is ready to meet the needs of tomorrow's users.

Our Offers

ICO – Initial Coin Offering

STO – Security Token Offering

RTO – Royalty Token Offering

Tokenising to make the stone liquid

A gigantic market

The real estate market is estimated at $280T of assets worldwide, including $37.5T in Europe. Real estate is the most favoured investment vehicle but remains, paradoxically, totally illiquid, and costly in administrative processes. Only 1% of assets are tradable on stock exchanges, which can be translated as ``only 1% of the market is really liquid``.

The Trilemma

Today, with the ``paper stone``, the real estate investment knows a very strong democratization but faces an unbreakable trilemma: profitability, administrative expenses or reduction of the risks, it is necessary to choose...

9 bénéfices apportés par la blockchain au secteur de l’immobilier

Real estate represents the largest asset class in the world, but also the least liquid. Traditionally, a property is sold once every 20 or 30 years and in a single unit. With the blockchain, it is possible to sell the property in one non-fungible token or several fungible tokens. Either the company behind the property digitizes a single token representing the whole property (and thus a share that represents 100% of the company), or several tokens, to fragment the property. Thus, instead of having one transaction every 20 or 30 years, we move to hundreds or thousands of transactions per minute.

This strong liquidity also brings advantages to the investor, who will be able to diversify his investments more easily.

If we take the real estate project from its birth (construction), we note that there are many steps until the delivery of the property. During this process, many losses take place. The traceability offered by the blockchain technology is an undeniable advantage. The hashs of the information related to the construction plan, the materials used, etc. and their flows can be recorded on the blockchain. This is currently the most widely used feature of this technology, but it is still very little used in the real estate sector.

The blockchain provides unprecedented data transparency. Once data is written in the blockchain, it can no longer be removed. It allows the management of value, rights, and data transfer in a totally transparent way. This quality is used for authentication.

Let’s take the example of the Georgian National Agency for Public Registry (NAPR) which does authentication on Bitcoin. A hash of the property title is written on the blockchain and corresponds to the hash of the same title written on the NAPR site and thus proves its authenticity. It is important to note that it is not the data that is registered on the blockchain, it is not made for that purpose. It is the hash of the data, its digital fingerprint, which is written on it and protected by cryptography.

This feature increases investor confidence.

Smart-contracts allow certain processes to be automated. It is in the smart-contracts that all the characteristics of the tokens are parameterized, for example, how many will be created? When will it be created? What rights do they give? etc.

They determine how many tokens the securities of the real estate company that owns the property or properties in question are divided, whether they give voting rights or not, whether they give dividend rights, how much, etc.

It is also possible to automate the payment of a rent on the blockchain, which would make it possible to have a proof of payment and not have to ask for a rent receipt. Same advantage with the lease, it can be directly registered on the blockchain and only the hash of the lease registration will then be provided if necessary.

The automation brought by smart-contracts makes it possible to do without certain intermediaries who traditionally intervene in the sale or purchase of a property. They can automate the administration, control and payment of contractors and suppliers in the real estate sector (e.g.: cleaning staff, craftsmen…). A 2019 Fibree report estimates a possible 70% reduction in administrative costs thanks to the blockchain.

Also, as we have just seen in the previous point, since everything is set up in the smart-contract, there is no need for a traditional financial intermediary to pay dividends or give the right to vote: generally, it is the platform that allowed the issuance of the tokens that supports this management.

Another example of reducing intermediaries is the decentralization of Airbnb. Automation makes it possible to do without such a platform. The counter-argument is often put forward that it would then be difficult to detect scams, but it is possible to reduce this risk by managing identities and alerts in the event of a problem.

Nevertheless, it is difficult to do without certain intermediaries. The notary is important in order to verify the condition of the property before transferring ownership, whether partial or total. Secondly, the property register is not digitized like the register of title movements. This final action is always to be done outside the blockchain until the law evolves.

In line with the two previous points, automation also has the great advantage of making processes faster. The reduction of intermediaries makes it possible to dispense with certain steps that previously took time. The use of the blockchain is unbeatable for issuing, selling, and reselling tokens.

In order to issue the tokens, the company must prepare a prospectus, or another document, depending on the jurisdiction, and depending on the amount to be tokenized. Once this document is completed and the characteristics of the token are determined, the issue can be done in 5 minutes. Each purchase/sale of the tokens will be done just as quickly after validation of the KYC of the buyers/resellers, which will take less time than in a traditional scheme.

One of the greatest advantages of tokenization is the ability to sell the tokens on a secondary market. It is important to remember that in the case of real estate (or even art, for that matter), it is the company that owns the property that is tokenized. Thus, on the secondary market, it is financial securities that are traded there.

This has the consequence of making the real estate sector even more liquid. Indeed, thanks to the opening to these new markets, it brings much more investors, and thus improves liquidity.

More investors and more choice for investors: token splitting helps lower prices. Instead of owning a whole property, it is possible to own 2, 5, or 60% of the shares of the company that owns the property and recoup the profits. This makes it easier to invest and diversify investments.

This has the side effect of increasing the attractiveness of this type of investment and ultimately making the market even more liquid.

As highlighted in the Fibree 2019 report, improved efficiency and transparency in real estate processes will save resources and reduce carbon emissions (and will do so even more so when evolutions occur). “The industry is moving from linear processes – where a building lasts forever – to sustainable real estate, and circular solutions that focus on reuse, limiting the deterioration of materials and reducing resource use and the CO2 footprint. These mechanisms and processes can be made more efficient through blockchain technology, as it can help manage the complexities of the circular economy“.

Tokenisation of assets, a perfectly adapted solution

Tokenising assets means digitising a right (political, financial, real estate) on a shared ledger (blockchain/DLT) and making it easily transferable.

... and compliant.

Real estate financing via the issuance of tokens is subject to specific regulations that vary according to the nature of the offer and the qualification of the tokens.

We propose various scenarios

The issuer tokenises shares in a company whose assets are real estate. Investors invest in the company to obtain an ``ownership right`` and a % of the profits.

The issuer tokens shares in a fund that has real estate assets. Investors invest in the fund, mainly to benefit from its profitability.

The issuer tokenises the right to a portion of its future revenues, without dilution or debt. Investors are guaranteed, and only acquire, a portion of future revenues, without ownership rights.

FAQ spécial IMMOBILIER

What is real estate tokenization?

Tokenisation of real estate is a relatively simple concept to understand. It consists of dividing a property into several tokens that represent a fraction of the underlying property. In fact, the real estate token is very similar to the shares of a real estate investment trust or SCI (société civile immobilière) where the capital (which has allowed the acquisition of the property) is divided into a multitude of shares conferring rights to their owner such as the collection of profits.
However, unlike shares, real estate tokens are created and registered on a blockchain to ensure the authenticity of the tokens and guarantee the accuracy of the information stored.

What is the concept of real estate blockchain?

Blockchain did not originate with real estate tokens. It is a technology that allows information to be stored and transmitted in a decentralised way in the form of unforgeable blocks. Each change leads to the creation of new blocks, replacing the content of the previous ones so that the information contained is always up-to-date and accurate.
The blockchain is the opposite of a centralised register held by a single authority, such as a land register, which identifies and certifies the property rights of individuals.
With the blockchain, each member of the network contributes to the reliability of the information so that an isolated individual does not have sufficient power to falsify the register.
The blockchain is therefore said to be tamper-proof and provides an unparalleled level of security.
However, and this is particularly the case with crypto-currencies and other crypto-assets, the blockchain has a real energy cost since it will require members of the network to perform validation calculations constantly to evolve the blocks and keep the register up to date.

How is the value of a real estate token defined?

To define the value of a real estate token, two signals can be taken into account:

  • the market value of the underlying real estate asset, which changes according to the behaviour of the real estate market
  • the market value of the real estate token which could depend on the supply and demand of the real estate token in question

 

Theoretically, the value of the real estate token should be equal to the market value of the underlying real estate. But it is now common, especially in crypto assets, to observe a decorrelation between the price of a crypto asset and its underlying.
In any case, the price of a real estate token depends on the rules defined by its issuer:
  • Some issuers of real estate tokens decide to price the token according to the market value of the real estate with, for example, an annual revaluation. The exchanges of tokens on the secondary market are then done by means of a waiting list, without an imbalance between supply and demand of tokens being able to cause an increase in the price of the latter;
  • Others may consider allowing the price of the token to be set freely according to supply and demand, leaving investors free to buy tokens potentially uncorrelated with fundamentals for speculative purposes.

What are the benefits of property tokenisation?

Tokenisation to limit property transaction costs

One of the first advantages of real estate tokens is the low transaction cost of buying and selling tokens.
Indeed, when you buy a property, you have to pay registration fees which represent about 8% of the sale price for old properties.
Similarly, you will have to go through a long and time-consuming contractual process (signing the preliminary sales agreement, expiry of the withdrawal period, fulfilment of the suspensive condition, signing the deed of sale, etc.) involving the intervention of many third parties (notary, estate agent, administration, etc.).

Note: Smart contract technology in real estate sales could automate all these aspects by drawing the effective consequences of the fulfilment of each contractual condition (e.g. obtaining financing) to effect an automatic transfer of ownership.

 

Therefore, the tokenisation of a property allows to free oneself from the intervention of third parties and long contractual processes. As it is not a real estate asset per se, but a digital asset, it can be traded instantly on a secondary market for a transaction cost that defies all competition!
In other words, this is tantamount to allowing a property to be continuously listed on a marketplace, which is not possible with shares in non-trading property companies (due in particular to the obligation to have the transfer approved by the existing partners). Thus, through its tokens, the property enjoys greater liquidity.

 

Increasing the liquidity of a property asset through geographical openness

 

Outside of major cities and capitals, real estate is not an asset known for its liquidity. Indeed, due to the multiplicity of property markets and the length of transactional processes, it is not uncommon to have to be patient before being able to sell one’s property. The involvement of individuals in property investment remains a very local dynamic where, for example, it is rare for an Alsatian to invest in Japanese rental property.

 

The division of a property into tokens allows the asset to change dimension by becoming digital. From then on, a multitude of potential buyers can be interested in the property and exchange real estate tokens continuously on a marketplace designed for this purpose, regardless of the geographical location of the property.

 

Secure transactions

 

The other advantage of tokenising a property is the high security of the blockchain. Unlike a centralized registry, the blockchain is known to be tamper-proof so there is no chance of your token disappearing due to human manipulation or error.
You then have ownership of the real estate token without anyone being able to oust you from the registry.

 

This security is a real plus when one considers that transfers of ownership of shares in SCIs are only recorded in a register kept by the company itself (in the best case). Proof of ownership of shares is then provided by a share transfer or subscription deed. The loss of these contractual documents is not without its problems…

 

Flexibility in the recognised rights of owners of real estate tokens

 

Although they are subject to specific financial regulations (financial securities or ICOs since the PACTE law), real estate tokens offer greater freedom to the issuer in the choice of rights recognised to the token owners.

Indeed, it is possible, for example, to envisage bond tokens backed by a debt security allowing the acquisition of a property with a fixed or variable coupon paid at successive maturity to the token owners. These bond tokens can then be easily traded on a dedicated platform.

 

There are many other possibilities, such as creating real estate tokens for the ownership of an investment property, where the monthly rent collected is divided among all token owners.

 

In short, as long as the regulations are respected, it is possible to envisage real estate tokens of a very different nature in order to meet investors’ demands as closely as possible.
It is true that real estate blockchain is still in its infancy, and token offerings are still very limited. However, it is not impossible that tokens could replace a significant proportion of paper-based investments and attract certain institutional investors to diversify their investment funds, particularly in view of the changing regulatory framework.

What about the law?

1 – The financial arrangement to tokenize a building

In almost every jurisdiction, there is no law (yet) granting that a token may represent partial ownership of a real estate asset. On the other hand, more and more jurisdictions make official that a token may represent partial ownership of a company. Tokenizing real estate is then done not by mean of tokenizing the property shares, but by tokenizing shares of a company that owns the property.

Nota: This company is typically a specially created investment vehicle (SPV) or trust that owns all or part of the asset. Tokenizing the company’s shares then amounts to tokenizing ownership of the asset.

In France, joint stock companies can record their shares’ movements onto a blockchain to simplify record-keeping through a “shared electronic record system” (DEEP). Such legal recognition appears in more and more countries.

 

Hence, transferring ‘real estate tokens’ means transferring company shares, and this can be done 100% legally without third parties getting involved (notary, lawyers). And this simplifies the transfer process: had it instead been possible to tokenize the real estate physical asset itself, each transaction would have required the extra burden of a notary act.

2 France and Europe

Real estate financing via the issuance of token does not fall under the law of participatory financing. Specific regulations must be applied, which vary according to the nature of the offer and the qualification of the token.

Issuers

YTY Assets allows you to raise funds by issuing your financial securities (and other assets) digitally. This is faster and less costly than the traditional method.

Overview

Overview of a list of investors to permit you to invite them to your ongoing operations, and future ones.

Configure

Issue your assets with advanced configurability.

Control the entire issuance process.

Simplification of post-issuance operations through automation (distribution of dividends or coupons, AGMs, voting, reporting).

Cap Table

Keep an up to date Cap Table.

ICO – Initial Coin Offering

YTY ASSETS for your fundraising

A new method of financing

Create a utility token that serves your community and your project.

  • An ICO is a method of fundraising, operating through the issuance of digital assets, called tokens, exchangeable for FIAT currency or other digital assets.
  • These tokens give access to the products/services of the project that issues them. ICO is a non-dilutive form of financing for companies.

The main pain points of ICOs

  • Management of unconventional uses : in practice, the behaviour of investors in ICOs is very different from that of traditional investments. The issuer must adapt to this to ensure productivity, efficiency, investor satisfaction and a good public image.
  • KYC / AML process: depending on the jurisdiction, KYC / AML requirements are more or less complex (different documents, live selfie above certain amounts invested…).
  • Payment scenarios and automatic reconciliation : provide all the desired payment means to pay in fiat or crypto, then automate the reconciliation with subscriptions and considerably simplify, with a huge productivity gain, the processing of non-exact cash receipts.

… and the YTY Assets solution

  • Create ERC-20 utility tokens, ready to be exchanged (CEX/DEX)
  • Set up ICO cycles and initialise founder tokens
  • Run affiliate programs
  • Validate KYC in seconds
  • Allow people without wallets to subscribe
  • Resist unconventional use

STO – Security Token Offering

YTY ASSETS for your financial securities

Traditional investing. Only better.

equity, bonds, real estate, fund units

You want the investment to be :

Abordable
Simple
Conforme
Low Risk

We have the solution: YTY Assets

Our SaaS solution enables the tokenisation of securities and the establishment of a marketplace. YTY Assets brings you superior automation, cost savings and risk reduction for

fundraising – asset management – secondary market

  • while being fully scalable :
    • unparalleled flexibility in asset modelling
    • unbiased compliance
      (regulations, confidentiality agreements, KYT, …)
    • standards-based, scalable, future-proof, API

Standard features of STO platforms

  • Tokenise any security (CFI), including stocks, bonds and funds
  • Manage different share classes

Additional features of YTY Assets

  • Trade OTC via a bulletin board
  • Stay compliant in real time with regulations and asset holder agreements, with a rules engine
  • Choose from 30+ blockchains and change if you wish
  • Perform token recovery
  • Implement adaptive KYC procedures
  • Enable automated reconciliations

RTO – Royalty Token Offering

YTY Assets for your royalties

Revenue Based Financing 2.0

A new alternative financing model. Tokenised for liquidity.

Le Revenue based financing (RBF)  raises capital in exchange for a percentage of revenue over a given period until it is repaid N times – or longer until recovery.

No dilution – No debt – Low risk

RBF is particularly interesting if revenue visibility is good: scenarios with regular revenues (SaaS, rentals…), business plans validated by due diligence and/or scoring….

The main pain points of Revenue Based Financing

  • Liquidity: the lack of a secondary market makes it very difficult for an investor to resell their investment.
  • Automation: end-to-end automated processes increase productivity while reducing costs and error rates.

RTO = Crowdfunded RBF

  • investors contribute funds to the company
  • investors receive royalty fees (tokens)
  • customers pay the company for services
  • X% pays investors in proportion to their tokens
  • investors can trade their royalties
For each investor, royalties are governed by a formal contract, which ends when one of three scenarios occurs:

1 – The royalty cap is reached

2 – The commitment period is over and the investor has recovered at least the amount financed

3 – The commitment period is extended beyond its initial duration until the investor has recovered the amount financed

Additional features of our services

  • Trade OTC via a bulletin board
  • Stay compliant in real time with regulations and asset holder agreements, with a rules engine
  • Choose from 30+ blockchains and change if you wish
  • Perform token recovery
  • Implement adaptive KYC procedures
  • Enable automated reconciliations

FAQ

Foire aux questions

What is the difference between YTY and YTY Assets?

YTY is the company behind YTY assets. YTY is a publisher and operator of ambient intelligence applications secured by NFCready® smart cards.

Who is the founder of YTY?

The founder of YTY is Olivier Cordoleani, CEO. For more information, please visit”Contact

Why is YTY Assets one of the only agencies that really simplifies the transfer of assets?

YTY Assets uses the ERC-1400 standard, which allows for any regulatory workflow to be completed during an asset transfer.
Verifying the correct application of all regulations, contracts and covenants at each transfer of securities is usually very costly.
YTY Assets allows you to minimise or avoid the human intervention required during an asset transfer while remaining compliant.

Which blockchain do you use to issue tokens?

All EVM blockchains can be used to issue tokens on our platform.
Ethereum is the best known, but we can issue tokens on several dozen blockchain networks (e.g. Binance Smart Chain, Wanchain, Skale, Rootstock, Ava/Athereum, Oasis Network) for reasons of scalability or transaction fees. Non-EVM protocols can be added on demand and according to market needs.

Can I transfer my token to another platform?

Absolutely, your token is transferable to any platform sharing the same token standard.

What is the difference between the ERC-20 and the ERC-1400?

  • ERCs (Ethereum Request for Comments) are the standards for deploying smart contracts. They each offer different possibilities.
  • The ERC-20 is suitable for modelling assets whose governance is simple in terms of transferability.
  • The ERC-1400 used by YTY Assets allows to model assets with complex transferability rules. For example, an equity token is governed by a shareholder agreement, company articles of association, local and/or international government regulations. These rules are complex, versatile and some are confidential. The ERC-1400 is ideal for dealing with such constraints.

What is a token?

What is tokenisation?

Tokenisation consists of digitising the ownership of assets in the form of tokens. In this context, the blockchain / DLT serves as an unforgeable register to store these tokens.
Tokenisation goes much further than the simple digitalisation of property rights, it allows :

  • Peer-to-peer transferability, via the Internet, without the intervention of a financial intermediary (e.g. account holder)
  • An opening to the global market
  • The availability of liquidity on currently illiquid assets (real estate, art)
  • Lower costs by eliminating intermediaries
  • Fractionalization of assets, i.e. the possibility to acquire a fraction of a token
  • High transparency through reliable (non-repudiable) and real-time auditing
  • The programmability of assets, thanks to smart contracts.

What are the benefits of tokenisation?

This depends on the profile of the users, who may be issuers of financial securities, financial intermediaries or investors. Today, when one buys shares from a bank broker, the securities are stored in their database, in a “siloed” system, with the indispensable financial infrastructure of settlement. With blockchain, securities exist as tokens and are transferable from one platform to another. This is the purpose of tokenisation. It gives the investor total sovereignty over his assets. He can delegate the custody of the latter to a third party, but he is also able to keep them himself or to sell them directly (transferability which implies the existence of liquidity and improves the risk ratio), without going through a broker or an organised market, in other words, without intermediaries. The investor can also partially sell a share (principle of asset fragmentation), which is impossible if one goes through the traditional mechanisms. The tokenisation of assets will undoubtedly make it possible, for example, to stimulate investment in unlisted securities.

What is a blockchain?

A distributed (or shared) registry is a registry that is simultaneously stored and synchronised on a computer network, and evolves by adding new information that has been validated by the entire network and is never to be changed or deleted.
A distributed registry has no central administrator and no centralized data storage.
One form of distributed ledger is the blockchain, which can be public or private.
But not all distributed ledger systems rely on a blockchain to successfully execute a distributed consensus: the blockchain is just one type of data structure that can be used in a distributed ledger.
The term “blockchain” only applies to linear transaction registries (e.g. Ethereum, Bitcoin, Tezos, Cosmos, Substrate) and not to systems based on acyclic graphs (e.g. Tangle, Hashgraph), nor to key-value systems coupled to a Merkle tree (e.g. MS CCF).

What is a smart contract?

A smart contract is a program executed by all validators in a network. Its execution is deterministic and is subject to a consensus between the validators before they can modify the state of the blockchain. The smart contract allows for high reliability in execution, total or selective transparency and traceability of its execution. The best known smart contracts are those based on the ERC models proposed by Ethereum. However, this technology is possible on many other blockchains.

How mature is the market for the tokenisation of financial assets?

Clearly, although the tokenisation of assets is working very well today and bringing real benefits, we are only at the beginning. The market, enabled by blockchain technology, is far from mature both from a technological and a regulatory point of view. On this second point, however, France is not too badly placed, as are Luxembourg, Switzerland and Germany. From a market point of view, some banks are interested and are starting to launch their solutions, as are some start-ups, but there are still few of them in Europe.

What about the issuer of financial securities?

One of the advantages is the speed with which it can issue tokens, at controlled costs, i.e. ten to one hundred times less than a stock market listing. Our platform not only allows tokenisation, but also, upstream, the creation of public or private token offerings with all the processes required for such operations: calls for investors, compliance with the various regulations (MiFID II, AMLD5, RG AMF), contracts and pacts, all of which are carried out in an automated manner, thanks to workflows combining regtech and fintech. As a result, transfer and settlement times are reduced to a few minutes compared to two to three days (or even 10 days in some cases) on traditional markets.

What is real estate tokenization?

Tokenisation of real estate is a relatively simple concept to understand. It consists of dividing a property into several tokens that represent a fraction of the underlying property. In fact, the real estate token is very similar to the shares of a real estate investment trust or SCI (société civile immobilière) where the capital (which has allowed the acquisition of the property) is divided into a multitude of shares conferring rights to their owner such as the collection of profits.
However, unlike shares, real estate tokens are created and registered on a blockchain to ensure the authenticity of the tokens and guarantee the accuracy of the information stored.

What is the concept of real estate blockchain?

Blockchain did not originate with real estate tokens. It is a technology that allows information to be stored and transmitted in a decentralised way in the form of unforgeable blocks. Each change leads to the creation of new blocks, replacing the content of the previous ones so that the information contained is always up-to-date and accurate.
The blockchain is the opposite of a centralised register held by a single authority, such as a land register, which identifies and certifies the property rights of individuals.
With the blockchain, each member of the network contributes to the reliability of the information so that an isolated individual does not have sufficient power to falsify the register.
The blockchain is therefore said to be tamper-proof and provides an unparalleled level of security.
However, and this is particularly the case with crypto-currencies and other crypto-assets, the blockchain has a real energy cost since it will require members of the network to perform validation calculations constantly to evolve the blocks and keep the register up to date.

How is the value of a real estate token defined?

To define the value of a real estate token, two signals can be taken into account:

  • the market value of the underlying real estate asset, which changes according to the behaviour of the real estate market
  • the market value of the real estate token which could depend on the supply and demand of the real estate token in question

 

Theoretically, the value of the real estate token should be equal to the market value of the underlying real estate. But it is now common, especially in crypto assets, to observe a decorrelation between the price of a crypto asset and its underlying.
In any case, the price of a real estate token depends on the rules defined by its issuer:
  • Some issuers of real estate tokens decide to price the token according to the market value of the real estate with, for example, an annual revaluation. The exchanges of tokens on the secondary market are then done by means of a waiting list, without an imbalance between supply and demand of tokens being able to cause an increase in the price of the latter;
  • Others may consider allowing the price of the token to be set freely according to supply and demand, leaving investors free to buy tokens potentially uncorrelated with fundamentals for speculative purposes.

What are the benefits of property tokenisation?

Tokenisation to limit property transaction costs

One of the first advantages of real estate tokens is the low transaction cost of buying and selling tokens.
Indeed, when you buy a property, you have to pay registration fees which represent about 8% of the sale price for old properties.
Similarly, you will have to go through a long and time-consuming contractual process (signing the preliminary sales agreement, expiry of the withdrawal period, fulfilment of the suspensive condition, signing the deed of sale, etc.) involving the intervention of many third parties (notary, estate agent, administration, etc.).

Note: Smart contract technology in real estate sales could automate all these aspects by drawing the effective consequences of the fulfilment of each contractual condition (e.g. obtaining financing) to effect an automatic transfer of ownership.

 

Therefore, the tokenisation of a property allows to free oneself from the intervention of third parties and long contractual processes. As it is not a real estate asset per se, but a digital asset, it can be traded instantly on a secondary market for a transaction cost that defies all competition!
In other words, this is tantamount to allowing a property to be continuously listed on a marketplace, which is not possible with shares in non-trading property companies (due in particular to the obligation to have the transfer approved by the existing partners). Thus, through its tokens, the property enjoys greater liquidity.

 

Increasing the liquidity of a property asset through geographical openness

 

Outside of major cities and capitals, real estate is not an asset known for its liquidity. Indeed, due to the multiplicity of property markets and the length of transactional processes, it is not uncommon to have to be patient before being able to sell one’s property. The involvement of individuals in property investment remains a very local dynamic where, for example, it is rare for an Alsatian to invest in Japanese rental property.

 

The division of a property into tokens allows the asset to change dimension by becoming digital. From then on, a multitude of potential buyers can be interested in the property and exchange real estate tokens continuously on a marketplace designed for this purpose, regardless of the geographical location of the property.

 

Secure transactions

 

The other advantage of tokenising a property is the high security of the blockchain. Unlike a centralized registry, the blockchain is known to be tamper-proof so there is no chance of your token disappearing due to human manipulation or error.
You then have ownership of the real estate token without anyone being able to oust you from the registry.

 

This security is a real plus when one considers that transfers of ownership of shares in SCIs are only recorded in a register kept by the company itself (in the best case). Proof of ownership of shares is then provided by a share transfer or subscription deed. The loss of these contractual documents is not without its problems…

 

Flexibility in the recognised rights of owners of real estate tokens

 

Although they are subject to specific financial regulations (financial securities or ICOs since the PACTE law), real estate tokens offer greater freedom to the issuer in the choice of rights recognised to the token owners.

Indeed, it is possible, for example, to envisage bond tokens backed by a debt security allowing the acquisition of a property with a fixed or variable coupon paid at successive maturity to the token owners. These bond tokens can then be easily traded on a dedicated platform.

 

There are many other possibilities, such as creating real estate tokens for the ownership of an investment property, where the monthly rent collected is divided among all token owners.

 

In short, as long as the regulations are respected, it is possible to envisage real estate tokens of a very different nature in order to meet investors’ demands as closely as possible.
It is true that real estate blockchain is still in its infancy, and token offerings are still very limited. However, it is not impossible that tokens could replace a significant proportion of paper-based investments and attract certain institutional investors to diversify their investment funds, particularly in view of the changing regulatory framework.

What about the law?

1 – The financial arrangement to tokenize a building

In almost every jurisdiction, there is no law (yet) granting that a token may represent partial ownership of a real estate asset. On the other hand, more and more jurisdictions make official that a token may represent partial ownership of a company. Tokenizing real estate is then done not by mean of tokenizing the property shares, but by tokenizing shares of a company that owns the property.

Nota: This company is typically a specially created investment vehicle (SPV) or trust that owns all or part of the asset. Tokenizing the company’s shares then amounts to tokenizing ownership of the asset.

In France, joint stock companies can record their shares’ movements onto a blockchain to simplify record-keeping through a “shared electronic record system” (DEEP). Such legal recognition appears in more and more countries.

 

Hence, transferring ‘real estate tokens’ means transferring company shares, and this can be done 100% legally without third parties getting involved (notary, lawyers). And this simplifies the transfer process: had it instead been possible to tokenize the real estate physical asset itself, each transaction would have required the extra burden of a notary act.

2 France and Europe

Real estate financing via the issuance of token does not fall under the law of participatory financing. Specific regulations must be applied, which vary according to the nature of the offer and the qualification of the token.

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