What Most Real Estate Tokenization Projects Still Need To Solve

The Spaces convened a panel led by host Mark Takuti with Dennis (Blocksquare), Claus (DigiShares), Kevin Goes (Prop Base), Michael (Shift) and Jens (Landhive) to dissect what real estate tokenization still needs to solve for mainstream adoption. Panelists agreed most tech and legal blocks are tackled, but distribution remains the biggest gap; liquidity is often a narrative more than a reality, with only a handful of venues offering compliant secondary trading. Dennis emphasized the need for transparent, verifiable valuation data—e.g., AVM/oracle feeds—to unlock retail participation. On enforceability, Blocksquare advocates economic-rights tokens with direct claims on assets, designed as crypto-assets rather than securities to broaden listing options while preserving legal recourse. The group debated SPV wrappers versus registry-native tokens: Claus defended SPVs’ practicality, while Michael pointed to on-chain land registries as the endgame, noting new legal complexities in pilots like Dubai. Jens and Kevin stressed investor trust: retail prefers stabilized, income-producing assets with clear exits, while accredited investors can accept vetted development risk if rights and cash flows are transparent and collateralized. Cross-border scaling remains constrained by local enforcement and residency rules; professional capital is less restricted. Misconceptions persist around instant liquidity and “tokenization equals demand,” pointing to a near-term focus on distribution, data integrity, enforceable structures, interoperability standards, and professional capital layers.

May Edition: Blocksquare x Spaces AMA — What Real Estate Tokenization Still Needs to Solve

Panel and roles (for attribution in this summary)

• Host: Mark Takuti (Blocksquare x Spaces AMA)
• Dennis (Blocksquare) — infrastructure for real estate tokenization
• Kevin Goes (PropBase) — tokenizing real estate in Southeast Asia
• Michael (Shift) — RWA-focused products (non–real-estate tokenization)
• Claus (DigiShares) — white-label tokenization infrastructure
• Jens (Landhive) — RWA platform focusing on regulated yield assets and development finance

Executive summary

• Distribution remains the largest unresolved bottleneck: issuers and platforms are not yet well-connected to large investor distribution channels and IR networks.
• Liquidity is more narrative than reality today: few regulated venues trade tokenized securities; peer-to-peer and issuer bulletin-board trading is the practical baseline. Real estate does not need or suit high-frequency liquidity.
• Data transparency and valuation assurance are critical for retail trust: automated valuation models (AVMs) as independent oracles with regular updates could standardize pricing signals for tokenized real estate.
• Enforceability matters: models that map clear, legally enforceable economic rights—ideally with lender-like remedies—are key to cross-border adoption.
• Structures are evolving, but SPVs still work: while some see SPV wrappers as an interim step, they remain the dominant, workable model across jurisdictions; more experimental land-title token pilots introduce new legal questions.
• Asset quality over speculation: retail demand gravitates to stabilized, income-producing assets with clear cash flows and exits; accredited/HNW investors may accept vetted development risk for higher returns.
• Cross-border reality is constrained: tokenization enables borderless discovery, but enforcement and eligibility remain local. Institutional/professional capital can move more freely than retail; global regulatory convergence will be slow and uneven.
• Standards and infrastructure are maturing: interest is shifting from hype to back-end infrastructure and interoperability (e.g., new EVM issuance standards) to avoid vendor lock-in and enable portability.

What’s still unsolved (industry gaps and how the panel sees them)

• Distribution (Claus)
  • The core unsolved problem is distribution. Issuers are not sufficiently connected to major distribution rails and investor relations channels. Work to connect these rails is ongoing.
• Liquidity (Claus, Kevin, Mark)
  • Liquidity should be treated as optionality rather than a given. There are only a handful (≈3–4) exchanges globally trading tokenized securities today, down from ~10 previously. Building a compliant trading venue for illiquid real estate is hard. Expect large crypto exchanges to favor REIT-like instruments over individual property tokens.
  • Practical near-term baseline: P2P/bulletin-board trading on issuer platforms or ATS arrangements in jurisdictions like the US. High-frequency trading isn’t the target; controlled enter/exit capabilities are.
• Data verifiability and pricing transparency (Dennis)
  • Retail participation is constrained by trust in valuation. Real estate lacks the multi-source price discovery that other RWAs enjoy. Expect convergence around AVMs acting as independent oracles delivering periodic (e.g., monthly) valuations and multiple metrics per asset.
  • Until valuation assurance is normalized, professional investors will remain more active than retail.
• Investor understanding across jurisdictions (Jens)
  • Understanding varies by investor type and by local property market norms. A UK asset vs. an Asian asset vs. a European asset may require different valuation approaches, legal framing, and disclosure to inspire trust.

Enforceability and legal models

• Direct economic rights vs. SPV shares (Dennis)
  • Common model: tokenize SPV shares (equity in a wrapper). Blocksquare’s approach: tokenize legally enforceable economic rights tied directly to the asset, while classifying tokens as crypto assets (not MiFID financial instruments). This could allow centralized exchange listing without securities exchange licensing—subject to exchange policies—because the token is not a traditional security.
  • Crucial requirement: investor remedies must resemble lender-like enforceability (e.g., direct lien or equivalent), enabling expedited legal recourse and default handling. Frameworks that survive defaults are likely long-term winners.
• Are current models scalable, or are we re-creating TradFi with extra steps? (Michael, Claus)
  • Michael: SPV wrappers are a primitive, interim stage. Long-term, the ledger and registries (e.g., land titles) should be on-chain (UAE is piloting). Ultimately: prime brokers on-chain and “real” tokenized stocks/titles, not wrapped representations.
  • Claus: SPVs are underrated—they work in most jurisdictions and are improving as legal familiarity grows; ~99% of projects still use them. Dubai’s land-title token pilot introduces a new token class blending utility/security; tradability outside the UAE and on major exchanges remains unclear and may create new legal complexities. In the long run, title tokens might become utility tokens with no yield and be tradable in specific jurisdictions; cross-border portability will need standards.

Speculative developments vs. stabilized assets

• Tokenization doesn’t create demand by itself (Jens)
  • Tokenization expands access but does not replace the need for trust in the asset, structure, and cash flow. Retail prefers stabilized, income-producing assets (intelligible property/tenant/occupancy/cash flow). Accredited/HNW investors may accept development risk—if projects are properly vetted, structured, and managed.
  • Market harm arises when speculative developments with weak structures and unclear rights are marketed as stabilized investments. The market is shifting from yield-chasing hype to fundamentals: source of yield, investor rights, and exit pathways.
  • Tokens are just interfaces; value sits in the real asset. Legal enforceability and transparency determine adoption.
• Real-world practices and vetting (Kevin)
  • PropBase focuses on built, operating assets (e.g., branded hotels/resorts in SE Asia), where cash flows are tangible. Pre-construction can be attractive (e.g., Dubai presales), but yield promises before completion must be scrutinized—where does yield come from if the asset isn’t operating?
  • Rigorous developer due diligence is essential (track record, financial strength). First-time developers on pre-construction pose elevated risk.
• Collateralization and structured exits (Jens, Mark)
  • Combining collateralized structures with enforceability and clear exit expectations (e.g., 3-year hold, 8–12% yields, refinance exit) builds investor confidence and bridges income strategies with development upside.
• “RWA moment” and market cleanup (Claus)
  • Utility tokens and ICOs are effectively over; what remains are security tokens and payment tokens. Timing favors RWA models grounded in fundamentals.

Cross-border scaling vs. local enforcement realities

• Borderless promise vs. local constraints (Mark, Jens)
  • Tokenization facilitates global discovery and distribution; however, eligibility and enforcement remain governed locally (e.g., Turkey restricting buyers, Dubai title tokens limited to residents). This reality will persist for retail for some time.
  • Tokenization can enable investors from restricted domestic markets to access vetted assets abroad (e.g., South African or Turkish investors buying UK/Swiss/US/Thai exposure subject to compliance).
• Regulatory convergence (Mark, Dennis)
  • Mark’s institutional perspective: global standardization emerges over years via industry bodies and G20 coordination, with local nuances.
  • Dennis: jurisdictions will classify real estate tokens differently (crypto vs. securities vs. sui generis). Expect slow movement toward dedicated rules; professional capital is comparatively unhampered, while retail global liquidity will lag.

Market structure, marketplaces, and capital layers

• Where is the consolidated marketplace? (Michael)
  • Fragmentation across countries and regimes is a blocker. Could a consolidated, multi-country marketplace (even if partial) catalyze mass adoption?
• Regionalized evolution (Kevin)
  • Real estate marketplaces typically evolve regionally (e.g., Zillow in US/Canada, PropertyGuru in SE Asia, Scout24 in Europe). Tokenized real estate likely follows similar regional patterns.
  • Tokenization is more efficient than legacy securitized notes; long-term, most asset classes (equities, bonds, treasuries, real estate) will be on-chain.
• Capital aggregation layer (Dennis)
  • Real estate in token form is not “retail-first” in many jurisdictions. A capital layer that aggregates liquidity for tokenized portfolios and channels professional/institutional flows could unlock the secondary markets and retail participation that crypto-native users expect.

Notable product and standards updates mentioned

• Shift: Launched six 24/7 tradable, asset-backed leveraged ETFs on Solana (via Jupiter), including long/short exposure to Tesla and a semiconductor basket; positioned between slow spot and highly volatile perps.
• PropBase: Ongoing rollout in SE Asia; seventh asset offering launching; model focuses on operating hospitality assets.
• DigiShares: Highlighted a new, open EVM issuance standard (referred to as “ERC 7x43”) backed by 30–40 companies, including competitors; goal is interoperability and vendor-neutral portability across providers.

Biggest misconceptions highlighted

• “Tokenized = instantly liquid” (Dennis)
  • Real estate’s notion of liquidity (days/weeks to sell) differs fundamentally from crypto. Clear, time-bound liquidity events (e.g., at project completion/refinance) set realistic expectations.
• “It’s timeshare/fractional with no exit” (Jens)
  • Mislabeling undermines trust. The focus should be on assets with clear cash flows, enforceable rights, and defined exits across categories (real estate, commodities, hotels), not on superficial fractional branding.
• “One global marketplace will suddenly appear” (Michael’s provocation)
  • Today’s landscape is fragmented. Progress is more likely via regional platforms, interop standards, and capital aggregation layers, gradually connecting into a broader network.

Practical implications and recommended focus areas

• For issuers and platforms
  • Build distribution: partner with strong IR networks, wealth managers, and regional marketplaces.
  • Prioritize data assurance: incorporate third-party AVMs and independent oracles; provide regular valuation updates and robust disclosure.
  • Use enforceable structures: whether SPV shares or direct economic-rights tokens, ensure lender-like recourse and clear default pathways.
  • Offer high-quality, understandable assets: emphasize stabilized income or properly vetted development with transparent, realistic assumptions.
  • Define exits up front: lock-in periods, refinance events, secondary arrangements (P2P/ATS), and redemption mechanics.
• For investors
  • Calibrate liquidity expectations: real estate is not crypto; focus on cash flow quality, rights, and exit terms.
  • Assess developer/operator risk: track record, jurisdictional norms, and source of yield (especially in pre-construction).
• For regulators and industry bodies
  • Encourage interoperable standards across chains (e.g., new EVM issuance standards) to reduce fragmentation and vendor lock-in.
  • Support clarity on token classifications and cross-border eligibility to enable responsible scaling.

Key data points mentioned

• Blocksquare: ~$200M in tokenized real estate value on its infrastructure; >25 deployed marketplaces.
• DigiShares: ~250 clients across 40+ countries.
• Exchanges trading tokenized securities: ≈3–4 globally (down from ~10).
• Typical real estate yield discussed: ~8–12% for stabilized assets (with potential equity uplift in hybrids).
• PropBase: seventh asset offering launching; focuses on operating hospitality assets in SE Asia.
• Shift: six leveraged ETFs (long/short) live on Solana.

Overall takeaway

The conversation is shifting decisively from hype to infrastructure, enforceability, and real-world execution. The near-term priorities are distribution, verifiable valuation data, enforceable legal rights, and quality assets with defined exits. SPV wrappers remain pragmatic today while novel models and registry-on-chain pilots evolve in parallel. Real liquidity will come as professional capital aggregates into standardized, interoperable markets—setting the stage for broader retail adoption under realistic expectations.