Tokenomics – Developing a new safe asset class
Asset tokenization develops to be one of the few cardinal applications and use cases for blockchain technology. Digital tokens or coins have the purpose to represent real-world assets. This includes tangible assets like real estate, gold and silver, but also intangible assets like intellectual property rights.
Asset-backed tokens: The tokenization markets and industries are international and the terminology is inconsistent and sometimes intentionally confusing. The tokenization of assets is wrongly put at an equal level with asset-backed tokens. The tokenization of real estate does not mean fractional land ownership. The term “indirect fragmented equity ownership stake” sounds formal and awkward, but gives a much better impression of the tokenization structure.
Fractional ownership: Tokenization can be applied to fractional ownership property developments. Under these “pay as you play” structures, the investor receives some form of fractional ownership rights for a fractional period. The investment is done with unconnected sharing partners, without mutual financial risks to combining resources by collectively own condominiums or other high-value real estates.
St. Regis, Aspen: Tokenization structures which have been successfully accomplished in the U.S. markets, can’t be copied one-to-one to other jurisdictions. The Aspen project, which allowed a trophy real estate asset in Colorado, USA to be crowdfinanced under U.S. regulations, has to be significantly adjusted to meet Thailand’s foreigner legislation, crypto regulations, and market requirements.
Crypto Thailand 2020: New license requirements for digital asset exchange and trading, new digital auditing (ICO) portal regulations, new framework for tokenization and custody biz, new ITO (Investment Token Offering). #Thailand Digital Asset Economy 2.0 #wouldyouliketoknowmore pic.twitter.com/wUi7k3dVOd
— Bangkok Lawyer (@bangkoklawyer) December 27, 2019
Liechtenstein Blockchain Act: Under the new legislation coming into effect in Liechtenstein in January 2020, a token container modell is introduced, to be maintained by trusted third parties. Disposal over the token results in disposal over the tokenized rights (not over the asset itself). Thailand does not have similar legislation yet.
Would you like to know more? The law firm is available to present its sophisticated concept of real estate tokenization to Thailand’s top property development firms.
Seven aspects of the tokenization of Thai assets
Tokenization can come in several layers. Tokenization grants derived rights over an asset under a complex contractual and regulatory framework. Under a perfect scenario, the token represents the asset, can be easily acquired and freely traded. The token holder benefits from all asset cash flows and asset appreciations. The reality is different. Seven main aspects should be carefully developed and defined:
#1. Representation of the physical assets themselves: For what does the token really stand? Does it represent full ownership rights, fractional ownership, or something different? Does it stand for legal or economic ownership of the asset and transfers the transfer of the token the asset itself?
#2. Asset-backed token: How far is the token asset-backed? Does it provide legal title in the asset or synthetic representation only? How far is the structure comparable with milestone transactions in order legislations.
#3. Corporate structure: How to set-up the Thai and foreign legal entities for a solid tokenization project? Which corporate risks are shifted to the token holder?
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#4. Thailand’s foreigner legislation: How can the foreigner legislation be implemented in Thailand’s tokenomics? Which restrictions apply for the property ownership, the shareholding and else?
#5. Thai REIT legislation: How to distinguish from the real estate investment trust and its special legislation? What are the elements and implications of crowdfunding?
#6. Token offerings: How can the token be marketed and sold to the public? Private sale, digital asset transaction, listing at an existing exchange, handling similar to an IPO, or shifting of the project to abroad? Is the token qualified as a utility token or security token? What are the consequences?
#7. Trophy assets: what are the legal and the practical requirements for the asset that should be tokenized? Which restructuring is required before the whole project can be started?
Token due diligence: The devil is in the detail. Does the token holder bear the trustee’s counterparty risk on the asset? May the asset be confiscated or the ownership in such an asset (gold, etc.) generally declared illegal. May the rights of the token holder be withdrawn if the acquisition was made illegally, for example, in violation of an embargo or by a blacklisted seller? Might the asset owner (trustee) be prohibited by the government from surrendering the asset to the token holder? PUGNATORIUS Ltd. offers to present the law firm’s comprehensive concept for Thai property developers, its proposal for a work program and project management. and its deal team to Thailand’s property developers.
Professional services in Thailand’s Fin-Tech sector
PUGNATORIUS Ltd. is the Bangkok-based specialist provider of legal services and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property acquisitions and developments. Sophisticated solutions in a complex business environment. Serious legal and tax advice in the land of smile.
Professional services: The law firm advises how to adjust international tokenization structures to Thailand’s complex regulatory framework of foreigner legislation, digital asset regulations, securities regulations, and civil law legislation. It advises and assists in the utilization of Thai real estate in international tokenization projects and in the marketing of tokenization projects for foreign assets in Thailand. It also accomplished a tokenization due diligence as a basis for investment in asset-backed token and other tokenization projects.
Fintech & crypto: With respect to Thailand’s fintech and financial service sector, the law firm offers mainly these seven legal and tax services:
- Thai crypto-compliant company formations
- Regulatory-avoiding and tax-efficient cross-border structuring
- Digital asset and financial services licensing
- Blockchain and ICO/STO advisory services
- Thai and cross-border tax structuring
- Cryptocurrency transaction support services
- Legal opinions and professional statements