The real estate sector is estimated by Savills to be worth over $200 trillion globally with approximately $185 trillion as residential property and $15trillion as commercial real estate. More up-to-date figures from Associated Press last year claimed that the value of real estate world-wide was almost $270 trillion and expected to grow to over $330 trillion by 2023. In the UK alone, the residential property sector is valued at $8.7 trillion. Therefore, it ought to come of little surprise that many organisations are looking at how technology, including Blockchain, could improve the efficiency of how real estate is bought and sold and managed on an on-going basis. Much has been written about the tokenisation of real estate yet, to date, there have been relatively few examples - possibly because tokenised real estate creates a digital security which is subject to the same regulatory restrictions of any publicly offered equity or debt instrument. This means that issuing a digital security in multiple jurisdictions is not a straight forward process given one would need to comply with a range of different regulatory listing requiremnets.

It was therefore interesting to see that Binance, the world’s largest digital exchange, recently began offering tokenised equities i.e., an asset-backed security, but sold as a token. The offer from Binance gives investors the ability to buy a digital version of Tesla and Coinbase, yet it didn’t issue a prospectus (the normal requirement), but issued a one page document instead. This has stirred the German Federal Financial Supervisory Authority (BaFin) into action, cautioning Binance by stating that a prospectus would have to be published if they (who/what??) are to be “transferable, can be traded at a crypto exchange and are equipped with economic entitlements like dividends or cash settlements.” However, in Binance’s defence, the German-based digital platform, CM-Equity (where Binnace has listed its Tesla and Coinbase tokenised version) has already listed (what??) and is trading similar tokenised assets issued by FTX and Bitterex. 

Bitterex, itself, is offering access to the following equities for investors in various countries where it is usually not possible to trade such stock. Hence, it is easy to understand the attraction of creating tokenised stocks if the process is, indeed, legal:

• Tesla 

• SPDR S&P 500 ETF 

• Alibaba 

• Beyond Meat Inc 

• Pfizer 

• Apple 

• BioNTech 

• Facebook 

• Google

• Netflix

• Amazon 

• Bilibili 

As an aside, the demand for more digital fiat-backed stablecoins will no doubt increase if tokenised stock trading demand grows, since how will investors be paid the dividends they are entitled to? Surely not in fiat? As has been mentioned in previous editions of Digital Bytes, expect to see more organisations creating stablecoins in all the major currencies across the world. The creation of a host digital €, Yen, £, CHF and $ (of which there are a number already) will then enable real estate to start paying rental income in a digital format. The ability to pay dividends on equities and rental income from property in a digital format also offers the opportunity for companies and landlords to begin making distributions to investors more frequently. Most payment platforms, such as Apple, GooglePay, Mastercard and Visa, all accept various crypto currencies so therefore ought to have no issues accepting these new digital currencies/stablecoins - yet another example of how traditional banks are likely to be by-passed since payments can be processed more efficiently.

Matt Levine is a well-respected and followed reporter for Bloomberg, so no doubt his recent comments on Coinbase will not fall on deaf ears throughout Wall Street: “Cryptocurrency exchange Coinbase Global Inc. goes public today, and I remain amazed at what a good business it is, compared to regular finance. Almost $1 out of every $1,000 in the entire crypto market - not $1 out of $1,000 traded, but $1 out of $1,000 of all the crypto that exists - went to Coinbase. Another way to look at it is that Coinbase touched $335 billions of crypto trades in the first quarter and took about 0.54% of the value of those trades for itself. Just for being the exchange, the platform where cryptocurrencies were traded.” Indeed, on the same day that Bloomberg printed this article from Levine, Goldman Sachs announced its latest earnings, with its CEO highlighting the growing importance of digital currencies and, in particular, cryptos such as Bitcoin: “Central banks are looking at digital currencies, working to apply this technology to the local markets and determine the longer term impact on global payment systems. Also, significant focus on cryptocurrencies like Bitcoin, where the trajectory is less clear as market participants evaluate their possibility as a store of value”.

Without a doubt, crypto currency volatility and ‘hype’ has dissuaded many traditional banks and asset managers from being involved in this new asset class. However, as we see organisations such as State Street's partnership with Gemini Trust, Fidelity Investments and BNY Mellon are now offering institutional-quality custody for cryptocurrencies. Thus  questions regarding crypto’s legitimacy are beginning to recede. 

BTC as a share of the cryptocurrency market

Source: Trading view

Historically, Bitcoin has attracted much of the attention when people talk about crypto assets but, as the above chart indicates, in the last year Bitcoin’s dominance over the crypto assets class has been falling. This is, in part, down to the fact that the next five most valuable crypto currencies (excluding Tether, which is a stablecoin) have performed so strongly in the last year compared to Bitcoin, as the table below shows.

 Performance of the six largest cryptos in a year

Source: Coingecko