How Blockchain Could Change the Real Estate Investment Landscape

An increasing number of countries have begun the process of implementing functional and legal frameworks to regulate blockchain-recorded tokens over the past several months, which has led to increasing exploration of these technologies across many investment sectors.

Further, the use of distributed ledger technology is a powerful disruptor at the transactional level, where significant disintermediation is occurring - especially with one of the most popular alternative investments: real estate.

In July 2018, Malta passed into law the world's first legislative framework for blockchain and DLT with the purpose of regulating ICOs and STOs, including a benchmark regulatory platform and process.

Following the G-20 declaration, seven European Union countries - the "Mediterranean Seven" - signed a declaration agreeing to cooperate on blockchain and DLT technologies.

A letter was prepared by the group and signed by more than a dozen members of Congress for the SEC chairman, ultimately inspiring four crypto-friendly bills to go to Congress in early 2019.South Korea and Brazil banned investment in ICOs in 2018.

Ultimately, this success and validation has led to broad acceptance of STOs across several sectors, including real estate.

Fractional real estateThe biggest game changer will likely be found in unlocking the liquidity of smaller investors through democratizing access, thanks to fractional real estate opportunities.

Since this class of investment was previously only accessible to high-net-worth investors, real estate investment trusts, opportunity funds, investment vehicles managed by major banks, or institutional investors, the tokenization of investment-grade assets into FRE significantly lowers the barrier of entry, priced at single token value with no traditional minimum investment limits or lock-in periods - creating a simpler and more secure opportunity for investors to buy in to.

Another way that the real estate investment and transaction landscape is changing due to blockchain technologies is the use of DLT to create public, state and federal government blockchains for all types of real estate-related databases, which increases accessibility, reduces rework, simplifies transactional procedures and reduces time frames.

While there is still a long way to go when it comes to universal regulatory acceptance - for example, China, India and several other countries have banned STOs outright in recent years - crypto tokens and DLT are changing investment processes in major real estate markets around the world.