The German Financial Market Supervisory Authority (BaFin) recently approved the issuance of tokenized real estate bonds using blockchain on Tuesday. This is BaFin’s first approval for a blockchain-based asset.
Fundament Group takes the lead
German company Fundament Group led the effort to get the regulator’s approval for the real estate bonds. The Berlin-based company specializes in tokenization of assets and invests in commercial real estate. It has holdings in Berlin, Jena, Hamburg, Fulda, and Rostock. The bond is issued on the Ethereum blockchain and will be backed by a portfolio of properties in the country. The issued volume for the tokenized bond will be 250 million euros ($280 million).
A share certificate will be received by the Investors who buy the bonds in the form of a digital token. The tokens will be traded on the secondary markets. These trades will not need banks as intermediaries. The company’s co-founder Florian Glatz commented on their success and said,
“As the first company to receive approval from the German Financial Market Authority for a blockchain-based real estate bond, we are excited to enter the sales process for the Real Estate Security Token, while already preparing the tokenization of other highly attractive assets.”
Moving in a positive direction
Fundament was amongst several firms that tried to tokenize holdings in real estate because of a generally positive response in the crypto-sphere about tokenized real estate. This is because of the difficulty in trading real estate, which often comes at a huge price. With the help of tokenization, it would become easy to break up a property into tokens and sell it more easily.
BaFin has been active in ensuring that risky trading ventures, especially those that resemble gambling, do not take a hold over Germany. Today, it also announced that it would continue to maintain its restriction on the sale, distribution, and marketing of contracts-for-difference (CFDs) in the country. There is a larger consensus amongst regulators in Europe to ban binary options and CFD products as they consider them very high-risk products.
The German regulator forwards a general administrative act to ensure that the CFDs remain prohibited in the country. The agency has also recommended the maximum leverage on various financial products, negative balance protection, and a restriction on incentives/welcome bonuses, etc. offered to trade in CFDs and related products.
In times like these, when BaFin is focusing extensively on investor protection, their approval of the tokenized real estate bond shows their confidence in blockchain technology.