Tokenisation in real estate is most likely to deliver the greatest value in funds and finance rather than single commercial assets, according to a new report by the University of Oxford.
In recent years, numerous start-ups have created platforms to fractionalise the value of an asset, debt and funds into digital tokens using blockchain technology. This fractional ownership is represented by a digital token in a blockchain ledger, the report explains.
The report from the Oxford Future of Real Estate Initiative at Saïd Business School found 15 examples of successful real estate tokenisations and a larger number of failures.
Nevertheless, the report said, “young investors could place a foot on the property ladder with just a small sum of money and trade their investments in seconds.”
However there is a “clear danger that innovation will be set back by years and possibly decades if attention is focused solely on the digital fractionalisation of single assets, for which the demand may be limited, the economics unconvincing and the obstacles significant,” it concludes.
The obstacles include the various new laws, regulations, and structures that must be put into place when fractionally dividing up the ownership of a single asset, said the report’s author Andrew Baum, professor of practice at Saïd Business School during a webinar on Wednesday.
“The mass market for the tokenisation of single commercial real estate assets … may be some way down the road,” he said, pointing out that a more realistic vision of the future is the tokenisation of real estate funds that are made up of diversified properties with fractionalised investors fall under established law.