Tokenizing Real Estate — Interview with Brickblock
Which problem is Brickblock trying to solve?
Brickblock’s mission is to make the world of investing more efficient, cost-effective, and inclusive. For investors, that means being able to invest in assets like real estate, investment funds, or other financial instruments without the high fees, geographic restrictions, and minimum amounts associated with traditional financial institutions. For asset owners and estate real developers, Brickblock offers an attractive, cheaper way to raise capital — access to a global market, a frictionless investment process, and quicker settlements. Perhaps most importantly, Brickblock introduces liquidity to a historically illiquid asset class.
What is your biggest challenge in tokenizing real estate?
Regulatory approval. We are at a point now where we have to wait for laws to catch up to the technology. To date, no project has been able to publicly issue tokenized securities in the European Union, and we believe we are well positioned to achieve this.
Why should anybody invest in real estate via Brickblock and not in the traditional way?
For the reasons mentioned above, which are made possible by our smart contract technology: low fees, access to assets around the world, transparency, and liquidity — all within a regulatory compliant legal framework in the European Union. These are all improvements to the way real estate assets are transacted traditionally. What doesn’t change with our model is the scope of investor protection.
What are my rights as an investor in tokenized real estate? Are they any different from traditional ownership rights of real estate?
As a token owner, you are legally entitled to the economic benefits and/or voting rights (if applicable; decided by the issuer) of the underlying asset. It’s important to understand that a token isn’t a tangible thing — it is essentially a registration on the blockchain that validates your share of the asset and claim to the profits generated by the investment. Your rights also depend on the issuer of the token. This information will be presented in a transparent way.
What happens if token owners have different plans regarding the real estate? Can you walk us through your decision making/voting process if there is any?
As with traditional real estate investments, investors receive either voting or non-voting shares, represented by their blockchain token allocation. If Investors have non-voting shares, they can expect prudent corporate governance from the managing partners along with any required corporate reporting.
What are my risks as a real estate token owner?
The risks are the same as if you were investing in real estate through a traditional model. Tokenization and blockchain technology are just digitizing the registry; adding this digital layer doesn’t increase or reduce the risk associated with investing in the underlying asset. Our technology simply enables faster transactions and settlements at a fraction of the cost of what it costs to do so now.
Every investor should educate themselves on the details — financial terms, market analysis, etc. — of the asset they are investing in. Brickblock’s clients make all of this information readily available.
What happens with my tokens (beneficial ownership rights) if Brickblock goes out of business?
In the case of bankruptcy, there is no impact on the functionality of the blockchain-based registry. The system is self-sustaining, which means beneficial ownership rights (investors’ entitlement to the profits of the underlying asset) are maintained. The ownership structure behind Brickblock’s service remains the same.
Who is eligible to purchase real estate tokens issued by Brickblock clients?
Eligibility depends on which jurisdictions allow their citizens to invest in particular securities. Such regulations are always changing, and our AML/KYC process will be regularly updated to reflect the most recent eligibility standards. It should be noted that some offerings are only open to accredited investors. Again, this threshold varies depending on the jurisdiction and the issuer of the token.
Will token owners be able to sell/trade their tokens?
Yes, this is one of the main benefits of investing in tokenized real estate — liquidity. It is our priority that investors are able to liquidate their holdings as quickly and easily as possible if they wish. It should be noted that token owners will be able to trade only with other investors who have passed Brickblock’s AML/KYC process, which is provided by a partner with license in the European Union.
On which exchanges are you planning to be listed? When do you think this will be?
We cannot speculate on this as the infrastructure for trading asset-backed security tokens is still very young. Currently, there are no laws governing security exchanges running on blockchain infrastructure.
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Note: This interview was conducted on 28.08.2018