Tokenization of Real-World Assets – Legal Setup for RWAs
As you look at the tokenization of real-world assets, the future of investment looks back at you. LegalBison assists with tokenization legal considerations.
- Legal assessment of a project
- Authentication & appreciation of the tokenized items
- Technical assistance & cybersecurity audit
- Ongoing legal advice & support
Business Models for RWA (Real-World Asset) Tokenization
The tokenization of real-world assets is the process of putting tangible items on the blockchain, representing each one in the form of a token, and the things that can be tokenized range from real estate, cars, and precious metals to the shares of artworks one can see at the famous world galleries.
Why tokenize real-world assets? It is a revolutionary opportunity to own almost any item in the world, even if it’s continents away from you. By purchasing tokenized shares of different real-world assets, people can own these things safely on a blockchain and use them at their own discretion.
In order to establish a company that will offer tokenization services to buyers and sellers on the blockchain, the primary step is to define its business model.
- Real estate
- Items of luxury
- Artworks
- Bonds
- Tickets
Among the most widespread assets that can be tokenized are the shares of home ownership. The process of purchasing these shares is called fractional investment. Companies that provide such services give clients tokenized ownership of a listing on the real estate marketplace. The algorithm is relatively simple: homeowners list their real estate properties on the marketplace and interested buyers can purchase their tokenized shares through making a deal on the platform. This is very similar to a classic investment, albeit the entire deal goes through on a blockchain.
Setting up such a company requires a proper understanding of a legal framework, as well as compliance with the AML-CFT regulations. Experienced lawyers can help you define the degree of legality for offering real estate tokenization services in your target markets. In addition, each real estate property must be properly evaluated before getting listed on the marketplace: in that way, you will ensure the fair distribution of tokens among buyers.
A famous example is RealT, purchasing properties in the United States and breaking down the ownership entity into tokens, giving owners a right to the rent perceived by this entity as the property is rented out.
Various items of luxury, from cars and boats to pieces of jewelry can be listed on a blockchain as well. To source, for instance, jewelry for tokenizing and listing it on the market, your company might need to partner with jewelers and collectors willing to present their items. To create a marketplace for items of luxury, understand how legal it is in your jurisdiction first since the laws and regulations are different for various luxurious items. A professional lawyer can help with understanding the framework and safeguarding your business from legal issues.
Examples of tokenized luxury items include:
- Cognac brand Hennessy’s Hennessy 8, pairing a unique NFT with a bottle of luxury spirit;
- Luxury car brand Rolls-Royce pairing a collection of six unique Phantom cars titled “The Six Elements” with NFTs;
- Numerous fashion brands such as Dolce&Gabbana, Gucci, and Louis Vuitton have issued clothing pieces tied to an NFT, that allows its owner to use its apparel on 3D metaverse worlds such as The Sandbox.
Tokenizing artworks and listing them on a marketplace is a shaky ground since there are many factors to be taken into consideration. Apart from the lawyers who define the legality of such practice in the jurisdiction of your choice, you must also involve art experts who will authenticate each artwork and estimate its value.
Needless to say, a team of tech magicians is needed to build a tokenization platform and a marketplace from scratch and ensure its cybersecurity.
Unlike other business models listed here, the tokenization of bonds most often requires a financial license since it directly deals with governmental funds or funds belonging to companies. Investing in bonds is a universally common practice among different age groups, which means that the demand for tokenized bonds is likely to skyrocket. The reason for it is simple: tokenized bonds are faster to issue and they don’t require countless pages of legal paperwork. An investment can be completed in the blink of an eye. Consequently, a bond tokenization platform has the potential to grow into a profitable business.
Larry Fink, CEO of Blackrock, has underlined the potential of tokenized bonds for the future of finance. Giving access to this market to more actors, improving its liquidity, and removing intermediaries and their associated fees would smoothen out the bond market and revolutionize it.
Such real-world assets as concert tickets and tickets to various events in the realms of culture and sport can also be tokenized. A platform dealing in the tokenization of concert tickets must register and obtain a license as a ticketing service provider. Besides, a market analyst should do the work of defining the target audience, such as frequent event goers, event organizers, venues, and even resellers.
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Examples of LegalBison's assistance with RWA tokenization
Every tokenization RWA project at hand is totally unique and has its own set of authentic properties. LegalBison is accustomed to working with a great variety of business models, defining the best incorporation route for each company. Launching your own platform for tokenization RWA is a thrilling adventure that will transform the tedious conventional investment procedure into a memorable experience for each of your clients. Hence, here is how LegalBison can turn your ambitions into reality.
Legal Assessment & Support
Though extremely innovative and creative, the process of tokenization cannot be conducted properly without a legal backdrop. However, who said that you will have to deal with it alone? Due to multiple years of experience in working with RWA tokenization companies, LegalBison knows exactly what each crypto-related project needs to operate legally. We will analyze your business model in full, assist with company formation, and take on all the licensing procedures along with the paperwork. By entrusting us with the legal side of the matter, you will be able to concentrate on planning out your business and marketing strategies.
AML-CFT
AML-CFT compliance is a major aspect of forming any crypto-related business, whether licensed or not. In the same way as LegalBison assists RWA tokenization projects with incorporation and licensing, we also commit to establishing watertight compliance, which includes:
- Drafting a unique AML-CFT compliance policy for each project
- Finding a professional individual to fill the role of an AML Officer
- Instructing and educating all the key shareholders on the compliance procedure
- Providing ongoing legal advice even as the company is already in operation
Authentication & Appreciation
If you plan to tokenize pieces of art and put them in a marketplace, you will need a professional to authenticate and estimate the value of each artwork. It is crucial for the fair distribution of shares. However, not only artworks need to be appreciated properly: the same goes for real estate, items of luxury, and even concert tickets. In the process of forming your company, LegalBison can assist you with assigning a responsible individual to undertake the appreciation of assets and defining their value and a proper share distribution.
Technical setup
An RWA marketplace won’t operate properly without a technical setup. Such intricacies as choosing the right blockchain platform, establishing token standards for it, developing smart contracts, ensuring cybersecurity, and creating a user-friendly and modern interface must be all tackled by an expert technician or, even better, a team. LegalBison is aware of the importance of a proper technical arrangement, hence we are ready to help you find IT experts that will love your project like their own.
Complete legal package for an RWA tokenization company
Tokenize real-world assets and build a fruitful business: with LegalBison, you will know exactly how.
FAQ about our legal assistance for the tokenization of RWA
Tokenization of real-world assets is the process of splitting real-world goods, like real estate, cars, items of luxury, artworks, and many others into shares and putting them on a blockchain in the form of tradable tokens. Later, anyone interested can purchase a token and own a share of a specified real-world asset, as well as sell it and trade it on a special marketplace.
Practically anything you can think of, from a house to a pair of earrings. The most popular tokenized items include real estate, items of luxury, artworks (paintings, music, and so on), and bonds.
Now it is easier than ever but only if you hire a legal professional to tackle the administrative side of the project: company formation, licensing, AML-CFT compliance, and IT infrastructure.
It depends on what and how you are planning to tokenize and list. Contact us for a free primary consultation so that LegalBison can estimate the licensing requirements for your particular project.
Of course, and people are doing it actively. While a lot of people cannot afford to purchase artworks from auctions or directly from artists, buying tokenized shares is drastically cheaper and affordable even for small investors.
Get in touch with our experts
Do you have a future or ongoing project relative to tokenization legal considerations? Do you plan on creating, for example, a marketplace of real-world assets put on a blockchain?
Do not overlook the regulatory requirements of your activity, even though it is very novel. Our consulting team will gladly provide you with guidance on the matter, to help you smoothly roll out your project.
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