In the cold winter of the cryptocurrency market, security tokens have recently been watched by the market and there have been more examples of applications. In October 2018, a luxury apartment development project in Manhattan, New York became an example of the first mainstream asset in the region. The tokenization will be carried out on the Ethereum platform. Valuation has exceeded $30 million.
Ryan Serhant, a broker who contributed to the single transaction, said the New York property market has been strong, but it may take some time to sell the new building at the right price. However, when using blockchain technology to tokenize assets, it can eliminate the huge pressure on traditional bank financing, which is healthier for the project and all stakeholders.
Assets such as real estate have not been highly liquid, and it is generally difficult to move quickly in the market. With the emergence of security token offerings (STO), asset holders can split the ownership of assets and sell them to qualified investors by issuing tokens. Investors can then buy and sell the tokens on the exchange under the regulatory framework. The tokenization of assets allows the potential value of assets to be released and increases liquidity, allowing more people to participate in real estate investment.
Similar property examples include a resort in Aspen, Colorado, which launched a security token on the crowdfunding platform Indiegogo in August 2018. Originally, the company behind the project, Aspen REIT, wanted to list on the New York Stock Exchange in the form of an IPO, but subsequently withdrew the plan.
The cryptocurrency and initial token issuance (ICO) market have recently stagnated and some industry players are gradually looking at different STO projects. For example, the famous blockchain investor Michael Novogratz is no exception. He has always been a big believer in Bitcoin, but when the cryptocurrency market is quiet, Novogratz may wish to find new opportunities in the STO market.
Novogratz said in early November 2018 that there will be more cases of real estate tokenization in the future. Although real estate tokenization may not be as “sexy” as Web 3.0, it will be part of a broader tokenization. He also mentioned that Galaxy Digital has hired Ian Taylor, a real estate-related developer at investment bank Goldman Sachs, to manage the real estate tokenization business.
Another example is in the art industry. In June this year, Maecenas, the blockchain art investment platform, held the world’s first cryptocurrency art auction at the British Art Museum Dadiani Syndicate. Among them, Maecenas tokenized Andy Warhol’s work worth about $5.6 million in “14 Small Electric Chairs” and auctioned 31.5% of the shares.
Under the bleak currency market, securities-type tokens are regarded as relatively reliable investments in this market, and their functions allow different types of assets to release their value through tokenization. Including the real estate and artworks mentioned above, in the past market environment, the holders have more difficulty attract buyers or get a better valuation, the emergence of STO is effectively solving this problem.