1.4 IMPLICATIONS OF REAL ESTATE TOKENIZATION

In recent years, blockchain-based tokenized property, whether real or otherwise, has garnered significant attention. Tokenization brings clear benefits, reducing paperwork in property transactions through smart contracts, saving time, effort, and execution costs, while streamlining verification processes for enhanced efficiency.

• Liquidity: Tokenization facilitates the safe Exchange of shares among investors, allowing each transaction to be recorded on the digital record of ownership. The imminent globalization of liquidity in tokenized securities arises as regulatory frameworks worldwide increasingly embrace and establish guidelines for the oversight of digital securities Exchanges.

• Data Transparency: Blockchain’s distributed ledger ensures data immutability and resistance to cyber-attacks. While transaction information remains trackable and visible, blockchain transactions maintain data anonymity through cryptographic hashes.

• Taxation: In traditional real estate transactions, buyers receive a deed and physically inspect the property. In the tokenized realm, caution is crucial due to prevalent scams; investors must verify the token’s legitimacy and its underlying real estate asset.

• Tokenized Real Property Different from REITs: REITs were a way to democratize commercial real estate ownership. Tokenization is an extension to what REITs are and inclusive of any real estate, and not just commercial. Through tokenization, each property can be divided into fractional shares, enabling individuals to become fractional owners of any real estate asset. This innovation widens the investor base, fostering a more inclusive and democratic form of ownership.

• Legal Implications: In traditional real estate transactions, a tangible deed verifies property ownership. Conversely, the tokenized realm harbors scams, necessitating vigilant investor scrutiny to ensure tokens authentically represent tangible real estate assets.