Head of International Corporate Law and Fintech Practice
Expert in fintech, crypto, and international corporate law with over 20 years of experience. Specializes in crypto licensing (VASP/CASP), iGaming business support, and international structuring, asset protection, and OSINT analytics for risk assessment and due diligence.
Registration of tokenization of real estate and other assets in Ukraine and abroad
The need for digitization of financial assets has become acute recently, given the rapid technological development of the world, which had a special impact on all spheres of social life without exception.
States that aspire to be among the leaders among the most comfortable for doing business have already begun to implement such technologies in their legislative practice.
However, in most of them, including Ukraine, there is no clear legal regulation of tokenization, which can become an obstacle to its implementation by corporations.
To begin with, it is worth finding out what tokenization is, namely: the process of “sharding”, splitting any input data into smaller pieces called tokens. These tokens can be words, phrases, symbols, or any other units of information that make sense in the context of the data, such as different types of assets.
Tokenization of assets –it is the process of converting a physical asset into its digital counterpart, presented as a crypto-asset on the blockchain, with the help of which assets become more accessible and liquid. This process also opens up new opportunities for investment and trade.
Who can benefit from tokenization?
Tokenization entails numerous advantages, including for business. In particular, it can help protect sensitive data by replacing it with non-sensitive tokens – random combinations of characters that represent no value to a would-be identity thief.
Tokenization increases the efficiency of data processing, allowing computers to analyze it faster and easier. Besides, it helps improve the accuracy of machine translations, text analysis systems, and other data processing applications.
Tokenization of assets
In the context of asset tokenization, its advantage is that it makes assets more accessible to a wider range of investors. Investment can be made by purchasing part of the asset, its token.
Their purchase does not require large amounts of capital, which is an additional incentive for investors. Tokens can be easily and quickly exchanged on crypto exchanges, which contributes to greater asset liquidity.
All token transactions are recorded on the blockchain, ensuring transparency and immutability. As a result, tokenization opens new opportunities for fractional ownership of assets, the creation of new investment products, and the development of decentralized financial markets.
Tokenization process
Many businesses are concerned about the potential complexity of the tokenization process.
However, in fact, it includes several fairly simple steps, including:
- the creation of a smart contract on the blockchain, which will determine the rules of ownership, use, and disposal of tokens;
- the emission of tokens – that is, direct tokenization of the asset and distribution of the generated tokens among holders;
- well, of course, trade or exchange of tokens on crypto exchanges, i.e. disposition.
But first of all, it is necessary to carefully approach the selection of assets that are most beneficial for tokenization.
The feasibility of tokenization depends on a number of factors, such as the liquidity of the asset (more liquid assets tend to be easier to tokenize and trade), and the regulatory environment surrounding asset tokenization, which may vary from jurisdiction to jurisdiction.
Tokenization costs also depend on the complexity of the process and the technologies used. It is equally important to assess the potential demand for tokenized assets before starting the tokenization process.
Some examples of assets that may be beneficial to tokenize include securities, real estate, intellectual property, etc. Tokenization of stocks, bonds, and other securities can make them more accessible to investors and can also make them easier to trade.
Tokenization of intellectual property can make it easier to license and sell.
Let’s consider the real estate tokenization process in more detail.
Real estate tokenization is the process of converting real estate ownership or equity into digital tokens based on blockchain technology.
Indeed, this process includes all the same advantages as the tokenization of other assets, but it also has several additional ones. For example, it can reduce the costs associated with owning and managing real estate because it eliminates the need for intermediaries and paper documentation.
Tokenized real estate can open access to new investors who previously could not invest in traditional real estate. This may include investors from other countries or investors looking for smaller investments.
It can facilitate innovation by enabling the creation of new types of real estate-related assets and products.
Real estate tokenization can exist in several forms.
Including:
- fractional ownership to divide ownership of real estate into shares that can then be owned by multiple investors;
- fractional investments to create fractional real estate investments that allow investors to invest in smaller pieces of real estate and investment funds to create investment funds that invest in real estate.
In the Ukrainian context, tokenization among any other assets, primarily real estate, is a critically important factor that will contribute to the reconstruction of the state in post-war conditions.
This approach will attract international investors, and correct state regulation will help prevent problems related to foreign investments and the sale of real estate in Ukraine.
Tokenization of both real estate and in general is at an early stage of development. It is important to note that legal and regulatory frameworks are still evolving in many countries.
Nevertheless, the potential of this technology to transform the way we own, trade, and invest in assets is significant, and global adoption is expected to grow in the coming years.
Experience of Western countries in the field of tokenization
Increasingly, international companies are turning to tokenization in connection with both the above-mentioned advantages and the desire to stay at the top of financial technological innovations, so it is gaining momentum all over the world.
Among the key players in this environment are the USA and Canada, Japan, Singapore, and Hong Kong. The EU also has a fairly advanced policy on the regulation of crypto-assets.
Countries such as Switzerland and Liechtenstein have already optimized their legislation regarding crypto-assets. Thus, these states are among the most attractive for investment institutes.
Tokenization in Ukraine
Many factors affect the implementation of legal regulation of crypto assets in Ukraine. Unfortunately, the Law on Virtual Assets has not yet entered into force. Despite this, there is currently no direct prohibition of crypto-asset ownership, only a lack of regulation.
Therefore, some Ukrainian corporations have already begun to use tokenization as a tool for managing assets, having adopted the relevant experience from technologically developed countries.
Conclusion
Despite the fact that Ukraine is one of the best countries in the field of technology, it still lags behind the leaders of digital progress in terms of tokenization and regulation of virtual assets.
This is due to certain legal shortcomings of the country, which, however, cannot be overcome either until martial law is abolished, or until appropriate amendments are made to the laws that will help bypass these time frames.
Nevertheless, this does not make Ukraine much less attractive for investment potentially, since the same tokenization is a necessity, not a wishful thinking of business in the conditions of post-war reconstruction.
The tokenization of real estate and other assets has already gained its application in the world due to its obvious advantages, which bring new changes to the investment standards that should be prepared for both corporations and investors and the entire IT industry.
Contact the legal company “Prikhodko and Partners”, and we will help you choose the most optimal options for tokenization and regulation of virtual assets at your request, and we will help in accompanying the registration process, sale of real estate, and other assets, in Ukraine and abroad.
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