11/7/2023 - Technology and Innovation

The future of tokenization and real estate crowdfunding in the middle of the Argentine crisis

By martin toledano

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Tokenization and crowdfunding are reinventing the financing and ownership of real estate projects in Argentina and the world, generating an interesting fusion of opportunities and challenges.

Tokenization is the process of converting rights over an asset or ownership into transactionable digital tokens into a blockchain, found several promising applications in the real estate sector. When combined with crowdfunding, which is a collective financing methodology, where several individuals bring small amounts of capital to support an initiative, it allows investors to efficiently gather capital for projects, offering an innovative alternative to traditional financing methods.

One of the significant advantages of tokenization and crowdfunding in the real estate sector is the democratization of access to investment opportunities. Traditionally, investing in root goods has been a game of great players due to financial input barriers. However, by dividing a real estate asset into Tokens, for example to $100, significantly reduces the input cost, allowing a wide range of investors to participate in profitable real estate projects.

This is extremely important at the time of small investors, to have interesting, modern and profitable options, when, in the midst of the Argentine crisis, there are very few sure opportunities to invest little money or savings, not to be wasted by inflation.

In addition, tokenization provides transparency and liquidity to the real estate market. Tokens, backed by real assets and registered in a blockchain, offer complete traceability of transactions and property. This reduces the possibilities of fraud and facilitates the purchase-sale of property fractions, contributing to a more liquid and transparent market.

However, there are also regulatory challenges and considerations that should be taken into account. In Argentina, the regulation of cryptocurrencies and tokenized assets is still under development. While efforts are being made to establish a clear regulatory framework, the lack of specific regulation can pose a challenge and insecurity for investors and entrepreneurs.

Innovation in tokenization and crowdfunding is driven partly by the adoption of blockchain technologies. This technology not only facilitates asset tokenization, but also provides a safe and transparent platform for fundraising. Blockchain ensures that all transactions are unchangeable and verifiable, which is crucial to ecosystem trust.

Tokenization of Property vs Financing

When the property of a property is tokened, investors acquire tokens that represent a fraction of the property's property. On the other hand, when funding is tokenized to build a property, remoderate, or commercially exploit it, investors acquire tokens that represent a fraction of the funds needed for the project, and may receive returns based on the income generated by the property once built, sold or marketed.

In the tokenization that involves financing to build, returns to investors can come from the income generated by the rent or sale of the property. In the tokenization of the property (hard or zero current implementation in Argentina), returns may come from the appreciation of the property value and/or income generated by incomes.

Legal General

Law No. 27,349 regulates "Collective Financing Systems" or Crowdfunding in Argentina, with the aim of promoting funding channels for entrepreneurial projects.

As for tokenization, the legal framework in Argentina is still evolving. The creation of a token does not generate an explicit legal bond, nor does it guarantee or grant normal rights or obligations. In order for a legal bond there must be a contract that guarantees it. Or a “smart contract” in the blockchain, supported by a private paper contract or held before Writeno. In addition, those who perform tokenization and provide the public with digital representations of values may incur a public offer of negotiable values without authorization by the National Commission of Securities (CNV).

Tokenization and Crowdfunding in the CNV Framework

Law No 27,349 also grants CNV the supervisory authority in cases that are used for the crowdfunding capital market. This body has the power to regulate the requirements to be met by projects financed in this way.

CNV plays a crucial role in regulating financial assets in Argentina. Registration (or not) in CNV is an important consideration for tokenization and crowdfunding projects. Registration may provide an additional layer of legitimacy and trust, although it may also imply a bureaucratic and costly process.

Tax treatment

The laws No. 27.430 and No. 27.541 could have implications for the tax treatment of property tokens in Argentina, according to the details of tax laws modification and the Law of Social Solidarity and Productivity Reactivation in the Framework of Public Emergency.

In an opinion of 2022, the Argentine AFIP interprets that cryptoactives do not align with the incorporeal goods mentioned in Law No. 23,966, Article 19 m), because they represent different facets of intellectual property and benefits for social advancement. Cryptocurrencies are seen by the Fisco as a new class of non-traditional financial asset, based on blockchain technology, which essentially encapsulates a right over a specific sum of money.

AFIP suggests that cryptocurrencies can be classified as securities given that they have similar key characteristics, such as being registered in a blockchain, being homogeneous and fungable goods according to Article 232 of the Civil and Commercial Code, issuing or grouping into series, and having the ability to be transported in a generalized and impersonal way in financial markets. In conclusion, the Fisco determined that cryptocurrencies are financial assets subject to the personal property tax, as stipulated in Articles 19 incise j) and 22 incise h) of the Law.

As for the Gain Tax, consultants point out that all gains obtained by selling cryptocurrencies or cryptoactives are achieved.

Criptoactive Regulation Law Projects

There are several bills of laws that refer to civil and commercial transactions of cryptoactive, which could include tokenization of real estate assets and blockchain-based crowdfunding in the near future.

It would be beneficial a clear and flexible regulatory framework, to be able to publicly generate and offer the tokenized assets, as well as the legal tool used to link the token with the good or the thing that is intended to tokenize, and its registration in the respective property records.

These normative aspects can have a significant impact on how they develop, whether they finance and participate in tokenized and collectively funded real estate projects in Argentina.

Scenarios and outlook

The future prospects for tokenization and crowdfunding of real estate projects in Argentina are promising, but largely depend on the development of a solid regulatory framework. Proper regulation will protect investors, facilitate entrepreneurial compliance and promote innovation in the sector.

In short, tokenization and crowdfunding represent an exciting evolution in the financing and ownership of real estate projects in Argentina. They offer many advantages in terms of accessibility, transparency and liquidity, but also present regulatory challenges that must be addressed to ensure their success and long-term adoption.

With blockchain technology as a facilitator, and with proper regulation, tokenization and crowdfunding have the potential to revolutionize the Argentine real estate market, providing inclusive and efficient investment opportunities. However, it is crucial that industry stakeholders continue to collaborate with regulators to develop a framework that promotes innovation while protecting the interests of investors and promoting market integrity.

The coronary mode highlights the relevance that has for small investors the discovery of innovative and profitable options, especially within the Argentine crisis. In view of the few reliable opportunities to invest small amounts of money or savings without being consumed by inflation, it is asked to act with a decision to identify and capitalize on these tokenization and crowdfunding options.

Martín Toledano* Lawyer (UCA-Argentina), MBA (UComillas-Spain), and consultant with extensive experience in cryptoactive, blockchain, transportation, certifications and project management. e-mail: contact@ mtoledano. info

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martin toledano

martin toledano

Lawyer (UCA-Argentina), MBA (UComillas-Spain), and consultant with extensive experience in cryptoactives, blockchain, transport, certifications and project management.

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