For assets that traditionally have large upfront capital requirements, tokenization lowers the barriers to entry for investment by enabling interests in the asset to be more readily divided across a wider pool of investors, democratizing access to the asset. Fractional ownership is securely managed by a digital register of members (ROM) on blockchain. New financial products could be distributed to a wider pool of investors at a lower per unit cost, with a fee structure inclusive of an access premium for the previously inaccessible investment opportunity.

Operational Efficiency – – BENEFITS OF TOKENIZATION

Smart contracts are programmable actions on the blockchain that facilitate the automation of processes such as compliance checks, investor whitelisting, and post-issuance matters including dividend distribution. Smart contracts also enable the programming of tokens with unique qualities, such that characteristics of each share class and customizable fee structures could be created for tokenized assets at a relatively low operational cost.

Reduced Settlement Time

Transactions in tokenized products can be settled almost instantly, unlike the days or weeks that it can sometimes take to settle traditional finance transactions.

Blockchain benefits – Data Transparency

Blockchain as a distributed ledger technology is known for its immutability and resistance to cyber-attacks, as data is distributed across a network of participating nodes as opposed to a single centralized database. While transaction information is made trackable and visible on blockchain, data anonymity of blockchain transactions are preserved by cryptographic hashes.


Tokenization enables liquidity by enabling the secure transfer of shares between investors, with every transaction reflected on the digital ROM. With regulatory regimes worldwide embracing, and establishing frameworks for the regulation of, digital securities exchanges, global public market liquidity for tokenized securities is also well on its way.

The lifecycle of a tokenized security

Real Estate Tokenization – Deal Structure

In the initial deal structuring stage, crucial decisions need to be made regarding the terms and conditions of the security token. Deal structuring is an integral part of any securities offering, irrespective of the technology employed. Tokenization is not meant to be a way of avoiding compliance with applicable legal and regulatory requirements; rather, the use of technology is
intended to fundamentally improve operational processes to enable innovative financial solutions.

Security tokens are typically issued by an entity, corporate or an individual, and provide the token holder specified rights such as ownership, repayment of a specific sum of money, or entitlement to a share in future profits. The form and structure of a tokenized security is crucial in determining the rights and obligations that the investor has in the underlying asset as well as
ultimately what form of return they will receive; it will also be the starting point in analyzing how gains and losses on the tokenized security should be taxed. Furthermore, tokenization could affect the valuation process, which may in turn affect the trading price of the security token. As tokenization is still a relatively new space, analysis of the above issues must be undertaken on a case-by-case basis. However, this may well change in the future as transaction data of tokenized securities accumulates for institutional analysis.

The issuer of tokenized securities must also seek professional advice to make informed decisions about which jurisdictions to include in the structure of the product. The regulatory framework governing tokenized securities will vary between jurisdictions while the different tax regimes across jurisdictions could have a significant impact on the price of the tokenized securities and its
cost-effectiveness. Further, issuers should also seek advice regarding the location of target investors, as this will introduce regulatory considerations related to the marketing and offer of tokenized securities.

Fractional ownership allows the interests in an asset to be shared among a wide pool of investors, and the programmable nature of security tokens technically enables unlimited share classes and widely customizable fee structures at a low operational cost. With these new options available, issuers will benefit from clearly identifying the target investor base, including levels of
investment capital commitment and anticipated demand for liquidity.

Real Estate Tokenization – Digitization of Asset

The digitization stage is where information traditionally stored in paper or document form is uploaded to the blockchain and coded in smart contracts, and security tokens are issued.

Primary distribution is the process where tokens are distributed to investors in exchange for investment capital, and the investors’ information is recorded on the digital ROM.

Real Estate Post-tokenization management

Post-tokenization management involves corporate action management processes including dividend distribution and shareholder voting, many of which can be automated by smart contracts coded on the token. Post-tokenization management will continue throughout the life of the token until maturity or redemption.

Real Estate Secondary Market

The secondary market is where the value of tokenization in enhancing liquidity is realized. This is where a token holder can trade tokens with another investor in an over-the-counter arrangement or on an exchange.