Traditional Asset Tokenization
Published on May 28, 2018
Author : Greg Hauw, Founder and CEO, Ohanae

Crypto's Impact on the Real Estate Industry

Real estate is one of the world’s largest asset classes. By some estimates, real estate alone accounts for over half of global asset values. In addition, real estate drives numerous other industries, such as banking, construction and services.

However, real estate assets are often illiquid, with transactions heavily regulated and time-consuming. The fragmentation of the global real estate market hinders the deployment of capital into the asset class. Lack of information on service providers is a challenge in efficiently managing properties, especially at scale.

Fractional Ownership

Fractional ownership to transform the housing market is part of a larger movement worldwide to transfer all kinds of records onto blockchain. A secure, decentralized way to register and store payments and transactions online through “smart contracts”. Blockchain can reduce paperwork and the need for other third parties by allowing people to buy and sell portions of buildings more efficiently. Blockchain is an efficient way of asset exchange: The assets can be bonds, real estate, stocks, etc. Blockchain technology will make it nearly impossible for hackers to do widespread damage and will protect against the kind of identity theft that conventional investors might be vulnerable to. 

Blockchain as a Service

Ohana Blockchain is the next generation of Enterprise Ethereum Architecture with decentralized trust, based on self-sovereign principles. Enterprises can develop blockchain applications on Ohana Blockchain to enable online sales of fractional shares of residential or commercial real estate properties. Customers can buy or sell “equity tokens” — which, in this case, represent shares of a building in cryptocurrency — the same way you would trade online stocks.

  • Ready to run enterprise smart contract platform based on the Ohana Blockchain Architecture Stack.
  • Verified Identity: Ohana Connect with Verifiable Claims, Password Management, and user on/off boarding.
  • Secure File Sharing with Document Tracking.

Assuring Regulatory Compliance Regardless of Jurisdiction

Technology evolves quickly, but regulation does not. Traditional asset tokenization represents one of the greatest opportunities, and greatest challenges, that the SEC and other global regulatory agencies will face over the next decade. Cryptographic tokens have drawn the attention of regulators around the world, with different countries releasing their own guidance on how offerings must be handled within their jurisdiction. The result is that regulatory parameters for token offerings are far from universal.

We must be mindful of the different regulations participants must follow such as Know Your Customer (KYC) and Anti Money Laundering (AML), by utilizing smart contracts to check and respond to the permissions of every person who attempts to use them in a transaction. If a user does not meet the proper compliance level attempts to buy a token, the relevant smart contract compares their permission level against an internal database, and instantly restricts their account from completing the purchase.

With hundreds of trillions of dollars in private assets that could be tokenized, the value that will be unlocked via tokenization over the next decade is in the tens of trillions of dollars. Asset tokenization is fascinating to watch. As the world’s assets become increasingly liquid, the concept of ownership will evolve in ways we cannot yet imagine.