SolidBlock CMO Yael Tamar was recently a guest on The Blockchain Show, a long-running podcast that demystifies crypto currencies and distributed ledger technology. She chatted with Ethan Kinderknecht, producer and co-host of the podcast.
Their talk covered a lot of ground, and along the way, she debunked the 3 biggest myths of tokenization:
Myth #1: Does tokenization mean multiple people own the property?
Technically, multiple people can own property, but it becomes complex, very complex, especially with title or ownership. Plus, governance becomes really difficult. So we create a company, which is usually, which is called a special purpose vehicle that owns an asset. And that company is broken down into shares. And these shares are sold to investors. That allows us to put a lot of people into ownership of the asset.
Myth #2: Is tokenization the same as an ICO?
When ICOs were first introduced, they offered a new mechanism, through blockchain, to finance some assets. But there was a mismatch of the asset to the financing. Number one, they were appealing to uneducated and unsophisticated sophisticated investors. This evoked concern about regulation. I think regulators are pretty much right on the spot to disallow this type of solicitation. For this asset class, the utility token, investors don’t really have any stake in the company itself.
Security tokens, on the other hand, are matched well thanks to two attributes: number one, they are illiquid. Number two is demand. Besides real estate, there are other illiquid things like art, commodities, or infrastructure, maybe green energy projects. But in terms of demand, who really wants to get into these assets? Not everybody wants a piece of a Picasso painting… but everybody wants real estate. Founding SolidBlock, we decided we were going to make real estate a kind of create a modified asset class, a security that’s backed by a real estate project.
Myth #3: Isn’t tokenization off-limits to ordinary investors?
Traditionally, securities are not available to retail investors, because it’s easy to rip them off. One really cool thing that the SEC is doing right now is looking into the definition of an accredited investor, saying, “Okay, well, maybe there will be criteria to establish how sophisticated you are as an investor.”
We are definitely working on that. There are people in the population that don’t necessarily fit the criteria of an accredited investor. These people want to build wealth. So our plan is to always do a crowdfunding offering alongside with a traditional securities offering, available only to accredited investors. Crowdfunding is always going to be limited, because crowdfunding laws limit the amount that somebody can invest and or the total amount, like in the U.S., it’s less than $1M.
Our goal is to always involve retail investors to an extent, to help them build wealth within the framework of their country’s regulations.
Discover more about why real estate is the perfect application for tokenization on the full half-hour The Blockchain Show podcast here!
And if you’re looking for innovative ways to build wealth – or bring in capital, click to pick your best time to chat with Yael personally.