The crypto-market has come under scrutiny by regulators across the globe. This is enabling blockchain startups to embrace their tokens as securities. We see a number of commercial real estate, art and other asset-backed securities company, strategize on launching legally compliant security tokens disrupting the traditional investments by moving them into blockchain.
It is hard to believe that the tokenization of non-liquid assets is likely to be the talk of the crypto-town in 2019 and beyond. By the tokenization of real and physical assets, the financial markets will be revolutionized. The way assets are valued will be changed and the companies might have rethink strategy when raising capital. The driving force behind the rise of asset tokens is the blockchain technology, the underlying technology behind the boom of Bitcoin.
The question arises, why tokenize now?
The cost of capital through IPOs and private equities are increasing every year. The tokenization of real-world assets reduces the cost of fundraising drastically, by the elimination of middlemen through automation. The fractional ownership benefits buyers. The volatility of assets’ pricing is advantageous to sellers.
Tokenization of everything ( Tokenizer for X ) is the term going forward in Wall Street, with giants like JP Morgan, Fidelity Investments and Overstock entering the security token market. Various asset types such as Commerical Mortgage Backed Securities (CMBS), Student, Auto and unsecured loans are tokenized.
What is the benefit?
Tokenization of traditional assets give the following benefits :
Greater Liquidity to Asset Owners
24×7 Open Markets
Lower Transactional Costs
Fractional Asset Ownership
Automated Compliance Checks
Smart Security Contracts
As we gaze into a trillion dollar industry, Blockchain App Factory moves forward with helping startups and organizations raise capital. We have divided the various asset classes for tokenization:
The asset class has been highly illiquid with returns, taking 5 to 7 years before we can see a sign of profit. The increased liquidity will encourage more people to invest in the asset class while attracting a larger pool of institutional investors.
We have seen a rise of gold-backed cryptocurrency, diamond-backed tokens and so on, aiming to provide the industry with more transparency. The tokenization of gold, diamond and other precious elements ensures liquidity, transparency and access for all.
Real Estate tokenization can be divided into four categories:
Tokenization of Commerical Real-Estate
Resenditial Properties Tokenization
Single Property STOs
Tokenization of Trophy Properties
Investors can own a piece of luxury property in prime areas such as Manhattan by funding condo development projects in these prime real estate regions. The entry costs and transaction fees for these REITs or as we like to call it, Real Estate Investment Tokens, are significantly reduced. Fractional ownership of -properties diversifies investors’ portfolio by reducing the risk of losses and increasing the liquidity. Also, the transactions reduce from T+60 days to T+4 minutes. Tokenization of real estate assets vehemently liquidates illiquid assets with long capital lock-ins.
Access to fine art can be democratized by art tokenization and creating 24×7, decentralized, digital galleries where the enthusiasts can own a piece of art. Tokenizing art exposes investors to an asset class, where they can save costs on preserving the piece. Fractional ownership of art ensures that enthusiasts and investors have a diversified portfolio. Users can trade exotic pieces of art without any intermediary like art-dealers, thereby reducing costs while preserving the art at the gallery. While selling the piece, with holding periods of 5 to 15 years, the art is sold and distributed to token holders.
Stablecoins are a type of asset-backed cryptocurrency pegged by traditional currencies. The stablecoins were introduced to curb the volatility in the crypto-market. In the future, we aim to focus on Stablecoin Development, a key area, and hope for currencies, across the globe, to move into the crypto-world.
At Blockchain App Factory, we are proud to be associated with the changing world of fintech in terms of the blockchain, while playing a key role in the tokenization of assets in a legally compliant way.
Our offerings include automated KYC/AML, Accredited Investor Verification and all-inclusive Portfolio management investor dashboard. In addition, we provide a compliant investor relations website which is user-friendly for the investors.
To drive the industry forward, we provide end to end tokenization solutions for real and physical assets with a white-labelled Tokenizer for X for hassle-free crowdfunding on the blockchain.