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Tokenized Property Gets Full Regulatory Backing In Germany

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July 23, 2019 | 

Darryn Pollock |  0 Comments| 

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A German start-up has obtained the backing of its financial regulator, BaFIN, for the amount of €250 million ($280 million) in order to offer tokens on the Ethereum blockchain that are securiterized by real estate in the country. 

Fundament announced today the first tokenized real-estate backed bond that can be widely offered to non-accredited individual investors.

Unlike previous attempts to tokenize property, which have been popular and successful, the backing of the German regulator means that this offering is much more inclusive and far less restricted. It will allow for customers from any part of the world to invest in German property, also helping add a lot of liquidity to the market. 

Getting into German real estate

The company will soon start a public sale of its tokens which are backed by real estate in Germany. These construction projects will be laid out by five project developers in three cities across the European country. 

Investors, which will not be restricted to how much invest, or geographically where they come from, will be able to buy into this market by simply purchasing ERC-20 tokens on the Ethereum blockchain.

By purchasing a tokenized bond so, the investor is offered a legal claim against the issuer of the bond to pay them an annual dividend of around four to eight percent. Then, once the run time of the fund is over and there is a potential exit, the token holders get the complete value that was within this fund.

Lots of benefits

Tokenizing property has been offered many times before. It is seen as a new way in which to entice buyers to a market, as well as to add some much needed liquidity. However, regulatory hurdles have often curtailed its effectiveness. 

With the backing of the German financial regulator, investors are invited into the market with a lot more ease and efficiency than ever seen before. At the same time, they are also able to reap the benefits of blockchain liquidity and sell on their tokens in secondary markets. 

A new model of property investment

This is a big step in regards to the regulation and understding of security tokens offered on the blockchain. Fundament admit to the difficut regulatory hurdles they had to leap over, but in doing so they have perhaps set a precident going forward. 

There is a high demand for individuals to be able to invest in property in a tokenized manner. However, the current restrictions make it equally as difficult as investing in property traditionally. 

This regulatory backing could provide a boost for the German real estate market, and it could also help bring in new buyers to a walled-off global market. 

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