The road from the statue of liberty to tokenisation
In the era of digitalisation and the emergence of blockchain technology, the tokenisation of assets has gained sustantially more steam.
Crowdfunding, also known as “community and participating funding”, was born in the 1700s. But it wasn’t until 1875 that it bore fruit for a landmark project that is world famous to this day. It was thanks to fundraising/ crowdfunding, mainly carried by the French citizenry, that the project known as the Statue of Liberty1 was able to see the light of day.
Fast-forward to over a century later and the emergence of the internet for the latest iteration of Crowdfunding, mainly for creative start-ups and charitable projects.
In the era of digitalisation and the emergence of blockchain technology, the tokenisation of assets has gained substantially more steam.
Tokenisation refers to the process of incorporating rights related to an underlying asset into a digital token on the blockchain ledger. It is therefore quite easy to register a title deed on the ledger, thus ensuring its traceability, immutable form and ability to be audited.
In the case of an investment vehicle aimed at raising funds, the use of blockchain and the issuance of digital investment tokens offers additional advantages such as lower costs (compared to an IPO), an automated process (via the use of smart contracts) or traceability. Investors also benefit from the new business model: disintermediation, transparency, lower entry costs and access to a local, national or international investment portfolio.
For many of us, a real estate investment remains safe, sustainable and tangible. However, with a direct investment requiring a significant capital outlay and or investment via a real estate fund requiring some knowledge of the financial markets, the path can prove perilous if it is not well guided. Moreover, in countries where an absence of reliable land registers limits investment, access to property encourages fraudulent practices.
Switzerland, has positioned itself as a vanguard of this new tech, as a major player with its legal framework and FINMA’s position on the issuance of digital tokens2.
Start-ups such as TokenEstate (real estate tokenisation), Tend (asset tokenisation) or Mt Pelerin (tokenisation of shares) are already lighting the way, and no doubt in the near future other platforms will also emerge.
It’s easy to imagine the advantages of tokenisation on the world of real estate. However, this would require that the land registry adopt and recognise blockchain registration as valid and legal within an enforced legal framework. Certain countries such as England, Switzerland, Sweden and Brazil3 are already studying the feasibility of such projects, and the use of blockchain may well replace the cadastre and other land registries.
Sebastien Flak is director at Crypto Solutions SA, a company held by Geneva Management group and is based in Geneva. He assists individuals and institutions to structure investments in crypto-assets, cash-out profits realised through tokens and understanding how blockchain will impact the financial business industry. He has a diploma from a High Business School in Paris in Economy and Finance.