Tokenization of Real Estate

Page 16

C. The Blocksquare Approach Another innovative approach to tokenizing real

This layered approach was demonstrated through a

estate, distinct from the Liechtenstein model, has

pilot project tokenizing a parking space in Ljubljana,

been developed by the blockchain company

Slovenia. The notarized loan agreement was

Blocksquare. Specifically, Blocksquare has

successfully registered in the national land registry,

developed a unique protocol for tokenizing real

marking the first instance of a tokenized real estate

estate assets that bridges the blockchain world

asset being recorded by a European land registry (70).

with traditional legal protections. At the core of their approach is the creation of a digital token called

By bridging on-chain and off-chain elements,

the Blocksquare Property Token ("BSPT") which

Blocksquare delivers robust legal protections to token

represents fractional ownership in a real property

holders. The corporate resolution confers clear

asset (64).

property rights, while the loan agreement offers recourse if those rights are violated. Blocksquare's

To initiate the process, the real estate asset is

hybrid model provides a template tor effectively

valued and a smart contract is created to represent

tokenizing real estate in a legally compliant manner.

the BSPTs. This ERC-20 compliant contract contains identifying details about the property and

With $74.4 million of tokenized property across 18

encodes the transactional rules of Blocksquare's

countries, Blocksquare demonstrates the viability of

protocol (65).

fractionalizing real estate on the blockchain (71). Their novel approach merits consideration as jurisdictions

To legally link the BSPT to the underlying real

around the globe develop regulations for digital assets

esta te, Blocksquare first establishes a Public

and tokenization.

Corporate Resolution, a formal document signed by the legal representative of the property owner (66). This resolution delineates the rights conferred

to BSPT holders, such as revenue sharing, and the obligations owed to them by the owner (67). The resolution is published on-chain, creating an immutable record that binds the token to the real estate asset. Blocksquare then implements a loan agreement, with the property owner as the borrower and Blocksquare as the lender of the BSPTs (68). The property itself serves as the collateral. This agreement is notarized and registered with the land registry, preventing the owner from transacting with the property until the loan is repaid in BSPTs (69).

64. Peter Mere, Real-World Asset Tokenization 2.0, Blocksquare, (Sept. 27, 2023), https://blog.blocksquare.io/article/real-world-asset-tokeniz a tion-2-0-€stablished-bridge-between-blockchain-and-land-reg istry-1/. 65. Id. 66. Id. 67. Id. 68. Id. 69. Id. 70. First tokenized real estate in Slovenia registered land registry, Slovenian Press Agency, (Sept. 28, 2023), https://english.sta.si/3218800/first-tokenized-real-€state-in­ slovenia-registered-in-land-registry. 71. Blocksquare [@blocksquare_10]. Another week, Another Tokenized Property, (Sept. 25, 2023),.

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