A rapidly growing number of countries have started the procedure of executing practical and legal frameworks to regulate blockchain-recorded tokens in the past months, which has created an avenue for an increasing exploration of these technologies across numerous investment sectors. Most recently, we talked about Blockchain potential in Supply Chain Logistics. We also talked about other industries such as Insurance that are poised to benefit. Additionally, the application of distributed ledger technology (DLT) is an authoritative disruptor at most transactional levels, where noteworthy disintermediation occurs— particularly with real estate.
Why the sudden interest in blockchain for real estate?
Much of the stages in the direction of regulation tackles instability and risk concerns associated with both initial coin offerings (ICOs) and security token offerings (STOs). For instance, in July 2018, Malta passed into law the world’s first legislative framework for blockchain and DLT with the intention of regulating initial coin offerings and security token offerings, as well as a benchmark regulatory platform and process. Similarly, In December 2018, the G-20 declaration dubbed “Building Consensus for Fair and Sustainable Development,” which summarized the discussions at the 13th G-20 meeting in Buenos Aires, Argentina was published by the Council of the European Union.
Succeeding the G-20 declaration, the “Mediterranean Seven” signed a declaration concurring to cooperate on blockchain and DLT technologies. Malta took the initiative to launch the declaration, with the other signatories comprising: Italy, Spain, France, Portugal, Cyprus and Greece. The agreement binds the signatory countries to endorse the technology and work together in the blockchain ecosystem. Interestingly, Switzerland also gave a dedicated framework for cryptocurrency, as did the Isle of Man. As many factions are in quest of fine-tuning and standardizing definitions of the diverse types of tokens, much of this regulation recognizes that security token offerings — which, are supported by physical assets — could be the solution to security and fraud concerns surrounding initial coin offerings and other types of crypto tokens.
Moreover, security token offering raises had a Ninety-five percent completion rate last year. In the end, this success and validation has led to wide-ranging acceptance of security token offerings across several sectors, including real estate. The major game changer will most likely be found in cracking the liquidity of smaller investors through democratizing access, thanks to fractional real estate (FRE) opportunities.
Non Accredited Investor
Since this category of investment was hitherto only accessible by high-net-worth investors, real estate investment trusts (REITs), opportunity funds, investment vehicles managed by major banks, or institutional investors, the tokenization of investment-grade assets into fractional real estate pointedly lowers the impediment of entry, as it is rated at single token value with no conventional minimum investment limits or lock-in periods — invariably forming a simpler and more secure opportunity for investors to buy in to.
Blockchain technology is changing the real estate investment and transaction environment with the use of Distributed Ledger Transactions to create public, state and federal government blockchains for all types of real estate-related databases, which augments user-friendliness, lessens rework, streamlines transactional procedures and decreases time frames. One of the biggest issues brokers face right now in Real Estate is the “Search” process. Frequently brokers will search for listings on databases such as “Zillow” that are outdated and may differ from other search sites. Blockchain Technology could assist in issues like these by having listings on one single decentralized framework.
World-wide regulatory acceptance
Although there is still a long way to go with regards to world-wide regulatory acceptance, digital tokens and distributed ledger transactions are altering investment processes in major real estate markets around the world. The increase of distributed ledger transaction usage in title authentication, assessment, meticulousness, insurance payment and settlement, smart contacts, construction monitoring combined with an increase in FRE STO opportunities, presents a strong growth stance for 2019.