Last week, the first-ever blockchain-powered real estate transaction, occurred on the Ethereum network in the European country of Luxembourg.
Property Token SA, a blockchain company in Luxembourg sold cryptocurrency security tokens on an Ethereum-based blockchain to investors. The tokens were a share in the company issuing the tokens and represented partial ownership of a luxury property in Belval, Luxembourg. These kinds of tokens are also referred to as “equity tokens”, and are similar to the mechanism through which shares on a stock market represent shares of the company.
This innovative method of securitisation allows investors to independently decide the size of down payment they wished to make. The minimum investment was as low as €1,000. Any capital gains or rents made on resale are automatically allocated in proportion to their contribution.
According to Property Token SA, the real estate market in Luxembourg is ‘traditional’ and this sale represents the shift towards a greater acceptance for more ‘unconventional’ methods of selling securities. It is just another example of a sector where blockchain technology is being utilised to decentralise traditional practices. This tokenisation makes the process more cost-efficient by reducing administrative charges and increases transparency.
The tokenisation of the process also removed the need to buy the property as a whole, attracting more investors who were only interested in partial ownership.
The company used technology provided by other Luxembourg-based blockchain firms: Tokeny, CoinPlus, and INNO.
As blockchain technology begins to be used more and more in a wide array of financial and asset transactions, it is likely that it will come under greater regulatory scrutiny, as is being seen around the globe.