Blockchain technology has reached new heights in Luxembourg. As of July 23rd 2019, the country’s first ever blockchain-fueled real estate transaction took place, utilizing the Ethereum blockchain. The tokenized real estate includes a luxury property located in Belval, Luxembourg.
Tokenized Real Estate in Luxembourg Explained
Property Token SA is the company behind the transaction, while Tokeny, CoinPlus, and INNO provided its underlying technology. All companies are based in the country of Luxembourg.
The tokenization allows investors to purchase and hold security tokens— registered on the Ethereum blockchain— which represent fractional ownership rights to a luxury property located in the trendy city of Belval.
According to Property Token SA, investors could acquire ownership for as little as €1,000:
“Through this new type of securitization, investors were able to freely decide the extent of their down payment (the minimum was set at €1,000), with rents and any capital gains on resale being automatically allocated to them in proportion to their contribution.”
The blockchain provides significant advantages when compared to the existing processes found in traditional financial securities.
Property Token SA utilized such benefits in the recent tokenization, and clearly believes they will reform traditional securities:
“This product is a major innovation in a rather traditional and conservative real estate market and gives the sector new perspectives… It is the Blockchain technology, and more particularly the “tokenization” process, that has enabled to cross the threshold by making it possible to achieve key functionalities such as the reduction of operational and administrative costs to a minimum, the transparency of a high-performance and robust technology, the integrated management of the distribution of rents to investors via “smart contracts”, the automated processing of investors’ onboarding (including the AML component), etc.”
As the security token industry continues to grow, token holders expect to see added liquidity through secondary market trading via regulated security token exchanges.
The Growing Implementation of Security Tokens
In addition to real estate, security tokens include assets such as equity, investment funds, and even fractional ownership of high-valued fine art.
Security tokens explicitly declare themselves financial securities, and are therefore subject to additional laws and regulations when compared to Initial Coin Offerings (ICOs). Some securities regulators believe nearly all ICOs constitute securities offerings.
This is the case in the United States for example, where Securities and Exchange Commission (SEC) Chairman Jay Clayton has suggested that digital assets must abide by the SEC’s existing securities laws.
The result has been the emergence of the Security Token Offering (STO)— the integration of the blockchain with traditional financial securities. STOs aim for regulatory compliance, which is their primary difference when compared to an ICO.
So far, the industry has seen 64 successful STOs, which collectively raised almost $1 billion to date.
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Image courtesy of Silicon Luxembourg.