Liquidity Benefits of Tokenization in Real Estate
– Tokenization improves liquidity and lowers costs for businesses in the banking industry.
– Fractionalizing assets can improve on-chain liquidity but comes with legal concerns.
– SteelWave splits assets into tradable securities to improve liquidity, resulting in smaller shares that can be easily liquidated.
– Unlike cryptocurrencies, these assets trade at net asset value determined by market conditions, not supply and demand dynamics.
– American investors have been skeptical, but stakeholders in the Middle East, Israel, and Europe are interested in tokenized real estate.
US Laws Push SteelWave Offshore
– Regulatory uncertainty in the US has pushed SteelWave to seek regulation in Bermuda, where established digital asset laws exist.
– SteelWave Digital, a subsidiary of SteelWave, aims to modernize laws to conform with evolving technology and integrate conventional institutional real estate ownership with the digital security ecosystem.
– SteelWave allows investors to convert their shares into digital securities and gain access to secondary market liquidity.
Tokenization Must Overcome Hurdles Before Going Mainstream
– Citibank predicts that tokenization will only benefit users when blockchains become more widely adopted.
– Technologies such as decentralized identities, zero-knowledge proofs, oracles, and secure bridges are needed to bridge blockchains with the real world.
– Zero-knowledge proofs and oracles have their own challenges and limitations.
– Security audits are necessary to ensure the safety of bridges that exchange tokens between blockchains.
– Citi estimates that the tokenization of securities will be worth $4-5 trillion by 2030 if these technologies are proven.
Federal Laws Will Say Whether Americans Profit From Liquidity Benefits of Tokenization
– The legal issues surrounding fractional ownership and tokenization are uncertain in the US.
– The SEC has denied the need for additional rules on cryptocurrencies and digital assets.
– Custodia Bank CEO Caitlin Long’s laws developed in Wyoming may benefit the fractional ownership industry.
– The federal government needs to decide whether asset tokenization will define the future of American investing.
Hot Take
Tokenization has the potential to greatly improve liquidity and lower costs for businesses in the banking industry, particularly in real estate. However, there are still significant legal and regulatory hurdles that need to be overcome before tokenization becomes mainstream. The adoption of technologies like decentralized identities and secure bridges, as well as the establishment of clear and comprehensive federal laws, will be crucial for the success of tokenization. Despite the challenges, if these issues can be resolved, the tokenization of securities could be worth trillions of dollars by 2030.
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