What are Security Token Offering (STO)?
Back in the day STO or Security Token Offering were upcoming hot things, as they tokenized and fractionalized a representation of an asset. These assets could be Shares, bonds or Real Estate; however secured on the blockchain.
Regulations on STO
Since STOs deal with traditional assets that are distributed by a secure blockchain they fall under certain regulatory framework, like the Anti-Money Laundering Laws, which sometimes help it seem more legitimized.
However, STOs don't require the oversight by SEC and many of the similar agencies under certain conditions depending on the country.
The requirements to be a investors in these tokens can be pretty steep in jurisdictions like US, which defeats the purpose of having Security tokens in the first place.
Security Tokens of Real Estate
Real Estate Tokens offered in STOs can be held or traded and gives the ownership of the property that they represent which are managed by the firm issuing these tokens.
The advantage here is that it can provide access to an average person with limited cash to Real Estate investment.
Investing in Real Estate traditionally
Traditionally you would look for a property through a broker and visit the provided options in your vicinity. Then you would have to buy the whole property with the full amount with all the registration hassles.
Investing in Real Estate by Security Tokens
Through Security token route a firm managing the property would handle all the hassle and issue fractionalized tokens to represent the whole property. Suppose a building complex worth $10 Million represented by 100,000 tokens of $100 each, therefore if you don't have $10 Million you can just start with 1 token of $100.
Profits on Security Tokens
In terms of Real Estate tokens, if there is rent that is being earned on that property, you would receive the proportional share from it as per your token holdings.
You can also trade them in the secondary market.
However, currently there aren't many platform or projects for the retail invests. Which is really bad as I would have loved to see fractionalized digital ownership of properties across the world.
Tezos blockchain
Currently most of the development on the Real Estate Security Tokens is happening on the Tezos blockchain with the new projects being announced as work in progress on it, such as Aqarchain (Not sure how they are going to be)
However, unlike other Crypto assets STOs and Security Tokens are still not as much in the public eye, which could be because there aren't many such projects at the moment.
You can check out the current meager listings at the following platforms:
Do note, because of certain regulatory requirements 1x exchange is only available to institutional investors.
Dubai International Financial Centre (DIFC)
DFIC is a special economic zone in Dubai covering 110 ha, established in 2004 and a financial hub for the Middle East, Africa and South Asia markets.
Why am I mentioning the DIFC?
Because currently there are certain firm in Dubai that are working towards tokenization of the properties there and DIFC, being a special economic zone has spiked certain interests.
However it should be noted that since these are the fairly volume and new projects there is a high level of risk involved.
Final thought
Currently there isn't enough market traction or demand for these Real Estate Security Tokens, but I an eager to see some good projects that can give me access to Real Estate investment with my limited funds.
This can be a great opportunity for many of the investors and developers to come together through the use of blockchain technology.
One of the hurdles in this endeavour is the regulatory framework and lack of awareness in the CryptoVerse about the STOs and Security Tokens.
Hope to see some progress in the near future.
