The adoption of cryptocurrencies and the emergence of blockchain platforms have made real estate tokenization a potential capital-raising option. With tokenization, ownership interests in real estate assets can be more immediately bought and sold, but tokenization requires a thorough understanding of the technology, the offering process, and the regulatory issues involved.
Investors typically invest in real estate through an LLC or limited partnership that owns an underlying property. With tokenization, LLC or LP interests are in the form of tokens that can be traded or used as collateral in smart contracts. The issuer must determine the number and type of tokens and select an exchange platform for trading.
The issuer must also decide whether a security is being offered and registration is required. Offering documents may include operating agreements, subscription agreements, and a private placement memorandum. Offerings must also comply with KYC requirements and have appropriate protection of user data.
Tokens should have built-in compliance features such as restrictions on transfers and secondary trading. Issuers will also need to determine how distributable cash will be paid (perhaps using stablecoins or other digital currency).
Listen as our authoritative panel discusses these and other matters associated with commercial real estate tokenization.
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