“This marks the beginning of a radical transformation of the real estate asset management sector.”
Matthieu Bouchaud, Product Lead at Codefi Assets
From title token prototypes in the UK to fractionalized condos in Manhattan, real estate tokenization has emerged in recent years as one of the most here-and-now use cases of blockchain technology for large asset and property managers. Last year, French asset manager Mata Capital moved the industry past another milestone with its tokenization of over €350M worth of real estate assets. The project involved the tokenization of an alternative investment fund holding a logistic platform worth €220M in the north of Paris. The asset-backed token issuance is among the largest real estate tokenization projects in Europe.
Beyond more efficient client onboarding, transaction processing, and reporting, Mata Capital aims to increase access and attract a wider pool of domestic and international professional investors. Baptiste Saint-Martin, Product Development Manager at Mata Capital, explains that the long-term vision of the project is to “build an investment platform that allows anyone to invest in private equity, real estate, infrastructure, or private debt with less than one euro, while respecting all the regulatory standards.”
Mata Capital partnered with Consensys to launch the solution on Codefi Assets, an Ethereum-based platform for issuing and managing digital assets. The Codefi platform also uses Ethereum smart contracts to define compliance requirements and validate KYC in order to issue corresponding shares to verified investors.
Here’s a behind-the-scenes look at how the platform works and a breakdown of what the project means for the real estate sector at large.
How They Built It
Tokenized Real Estate
One of the unique advantages of the Ethereum blockchain is that anyone can easily mint and distribute digital tokens that represent fungible, non-fungible, and financial assets that can be verified on a distributed ledger. For historically monolithic assets like real estate, blockchain tokens allow properties to be easily fractionalized so digital shares can be distributed to both institutional and retail investors.
Since the launch of Ethereum in 2015, the community has developed widely-adopted token standards—lists of technical requirements that smart contracts must fulfill for a token to be compliant and compatible across the Ethereum network. For Mata Capital’s solution, the Codefi Assets platform uses the ERC1400 token standard to represent shares of real estate funds on the Ethereum blockchain. ERC1400 ensures that tokens can be minted, transferred, and burned by an administrator, as well as bound to legal documents and agreements.
Before deployment, all smart contracts developed for Mata Capital’s solution were audited by Consensys Diligence, our team of blockchain security experts.
Investor Onboarding: KYC Compliance and Whitelisting
The Codefi platform streamlines investor onboarding for Mata Capital by enabling potential investors to create accounts, complete a KYC/AML compliance form, and upload all required documents. Eligible investors are then whitelisted so that their Ethereum address can receive the shares purchased on the platform. Mata Capital has so far onboarded approximately 80 professional investors.
Upon payment validation, Mata Capital uses the Codefi platform to sign a digital certificate with their private key and authorize the transfer of real estate security tokens to investors. Investors then receive a receipt of the sale that links to the transaction on the Ethereum blockchain.
What This Means for Real Estate
Mata Capital’s tokenization project is a signal that some profound changes are in order for the real estate sector, both near-term and long-term. Blockchain technology has obvious benefits for information processing, but its particular advantage is the opportunity to create significantly more affordable investment products. Here are what we see as the top three trends to pay attention to as blockchain solutions catch on in real estate:
Digital is inevitable. In the real estate industry today, asset management is still bogged down by paper processes for validating KYC and managing investor registries. Platforms like Codefi finally create a secure, digital layer for modernizing these industry workflows.
Transparent assets are coming. If the 2008 subprime mortgage crisis was a case study in opaque assets, then Mata Capital’s blockchain-based solution is setting a new standard for asset transparency. As more real estate blockchain applications go to market, investors will expect transparency of asset information to inform their decisions and risk analysis.
A level investment playing field. In many countries, access to private equity funds is usually limited to accredited and institutional investors, with investment minimums ranging from $100,000 to $250,000. Moreover, asset managers incur setup costs which are typically passed through to investors in the form of fees. Low-cost token issuance and transaction processing will enable asset managers to offer radically more affordable investment products, which is a win-win for both issuers and investors.
Mata Capital is now concentrating on creating a secondary market for the tokenized shares. Baptiste Saint-Martin explained that they are in active discussions with their counsels and monitoring the regulatory updates to “make sure we provide a solution that is compliant and valuable for our clients.” Their Ethereum-based solution has the potential to facilitate cross-border distribution of financial assets while ensuring KYC compliance.
Matthieu Bouchaud, Product Lead of Codefi Assets, believes Mata Capital’s initiative is a powerful proof point of how seamlessly institutional players can adopt blockchain solutions and also how retail investors can easily purchase complex financial products through a user-friendly dashboard like Codefi. Codefi’s all-in-one platform, Bouchaud explains, now enables the “move from the age of experimentation to one of industrial growth.”
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