The convergence of finance and technology led to a huge boom in Fintech services transforming several industries for the better. In the same way, security tokens open doors for more efficiency and transparency in the real estate industry.
After several crowdfunding campaigns emerged in the market in the form of ICO’s and IEO’s, it is now time for STO’s (Security Token Offerings) to make their mark.
What Does a Security Token Denote?
It is a tradable token issued with the help of blockchain networks and smart contracts to prospective investors. It gets value from numerous real-world assets. All security tokens have to follow securities laws issued by regulatory authorities in their respective operational jurisdiction. The tokens can be exchanged by investors as high liquidity is provided in the leading cryptocurrency exchanges and secondary markets. The owner of a security token gets fractional ownership rights.
Some Important Stats Related to Security Tokens
- The market cap for Security tokens exceeded $374 million in December 2020.
- The monthly trading volume for security tokens was $2.6 million in December last year.
- The real estate tokenization market exceeded $25 million at the end of 2020.
- 39 big banks in the world are working on different security token projects.
- The total market cap for security tokens rose by 500% in 2020.
- Security tokens are predicted to raise more than $100 million in 2021.
- More than $500 million investment is expected from venture capitalists and institutional investors in security tokens.
How Will Security Tokens Be an Advantage for the Real Estate Industry?
- It will eliminate middlemen like brokers and agents from the system and property sales can be done between the buyer and seller directly.
- The distributed ledger leads to a lot of transparency as documents and maintenance of the asset can be tracked on a real-time basis.
- Smart contracts ensure complete immutability as all the rights and legal responsibilities have been already embedded into the token.
- Users have full control over their funds without the involvement of any central authority in the system.
- Small investors will benefit from lower prices and they can afford to put their money on desired properties. This will broaden access to a large extent.
- The tokens can be traded anywhere round the clock and are no longer restricted by limited hours in a traditional stock exchange.
- It offers more diversification for wealthy investors and offers more returns and wider property choices than a Real estate investment trust (REIT).
- REITs have a high minimum investment threshold when compared to security tokens.
- Investors can also participate in the governance of the property through decision-making powers and voting rights.
- Automation will help in reducing the different overhead costs involved in distribution and administration.
- Investors can discover the prices of properties on a real-time basis in the secondary market leading to them signing profitable deals.
- Numerous payment methods will be accepted like fiat currencies, cryptocurrencies, and stablecoins providing a lot of flexibility to investors.
The Top Projects in Real Estate Security Tokens in the Market
- Aqarchain in Saudi Arabia developed its real estate investment platform on the Tezos blockchain network. They have applied to the Dubai International Financial Centre (DIFC) to get an operational license for CAT4 crowdfunding in properties. Tezos was specifically chosen due to its supreme security standards, on-chain governance system, and business-friendly technical infrastructure.
- NTT Data, a Japan-based MNC joined hands with Securitize, a digital security issuance platform for creating a security token marketplace. They are targetting corporate investors who are interested in investing in the capital market. Securitize already follows the regulations issued by authorities like the SEC (Securities and Exchange Commission) and FINRA (Financial Industry Regulatory Authority).
- SBI Holdings, a popular Japanese financial services company launched its own STO on the Ibet blockchain network. Many properties will be tokenized in the future. The guidelines mentioned in the country’s Financial Instruments and Exchange Act will be followed.
SolidBlock will offer $150 million of property-backed security tokens to investors on the INX trading platform. It includes real estate assets located in various countries like the USA, Thailand, and the United Kingdom. It has also teamed up with Emirex, a Cryptocurrency exchange for launching STO’s in Dubai. Investors can buy the EMRX token through the alternative trading system. The prices of offices in Dubai are expected to decrease due to friendly visa regulations passed recently by the government.
The awareness of security tokens has increased now leading to more demand. It democratizes access to property investment. It has surpassed the growth witnessed in cryptocurrencies and equity shares. Hence, it offers high returns and no investor in the market can afford to ignore it now.
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