Fifth Wall Makes Strategic Investment in Harbor’s Blockchain Technology To Disrupt Real Estate Capital Markets
Harbor Aims To Revolutionize the World’s Largest Capital Market with Innovation in Crypto-Securities Compliance
Fifth Wall is excited to announce our investment in Harbor, the first blockchain technology company addressing the regulatory challenges of trading private securities on blockchains, including Initial Coin Offerings (ICOs) and secondary trades. Harbor’s decentralized compliance protocol built with blockchain technology will standardize the issue and trade of crypto-securities. In layman’s terms: Harbor helps protect coin issuers and investors by making it easier to abide by securities, tax, and other regulatory requirements, introducing needed “law & order” to the current “wild west” atmosphere of the ICO boom.
Considering Fifth Wall’s focus on Built World technology, one might wonder what our interest is in crypto-securities compliance innovation. We care because the lack of crypto-securities compliance is hindering the tokenization of real estate securities. Among categories of private securities, real estate dwarfs any other. The value of U.S. real estate alone is $40 trillion, significantly larger than all U.S. stock markets ($35 trillion). Real estate is the U.S.’s largest capital market, the largest lending category, the largest store of consumer wealth, and comprises over 13% of U.S. GDP. Despite their vast size, real estate capital markets are among the least liquid and transparent in existence, not to mention among the most heavily regulated asset classes.
Enter blockchain technology.
Blockchain’s key breakthrough is allowing market participants to transfer digital assets without the need for a centralized third party, thereby improving the efficiency and transparency of capital flows, while lowering transaction costs. However, increased liquidity brings significant challenges to issuers and investors. Private securities, such as real estate securities, must adhere to the regulations of governing jurisdictions for both initial issuance and secondary trades. Almost all coins in circulation were issued as non-securities, but the securities status of many are in question, leaving issuers in a precarious position and contributing to the current ICO market’s unpredictability. Without appropriate regulatory protocols, no meaningful ICOs of real estate assets will occur, and trillions of dollars of real estate value will remain untouched by ICOs and blockchain technology.
The Harbor protocol remedies this problem by delivering critical compliance infrastructure for crypto-securities, allowing issuers and investors to play by existing rules to enforce compliance across all transactions and jurisdictions. To date, the absence of such a regulatory framework has been the major hindrance in the tokenization of real estate assets using blockchain technology. Existing blockchain solutions have already enabled real estate tokenization — meaning it’s technically possible to fractionalize ownership using blockchain technology and a crypto-currency — but the absence of appropriate regulatory compliance has deterred institutional-quality real estate investors from participating, particularly at scale.
Harbor will allow real estate assets to securely ICO and trade using a decentralized blockchain ledger, releasing latent demand to tokenize real estate transactions that were impossible before the protocol’s invention. Harbor represents the key to unlocking an unprecedented amount of value by providing the rails to democratize access to the most valuable asset in existence: real estate. To put this into perspective, as of 2016, the value of professionally managed global real estate alone was $7.4 trillion and all developed real estate globally amounts to about $217 trillion.
Harbor’s team is beyond exceptional and uniquely poised to tackle this enormous opportunity. Fifth Wall believes Harbor’s protocol is precisely the standard the industry needs to trigger a tsunami of real estate assets that will tokenize, ICO, and trade on the blockchain. This represents the most profound, disruptive change to real estate capital markets ever and the potential to spur the mass adoption of institutional blockchain solutions within the broader real estate industry. Fifth Wall is thrilled to be part of the journey.