Real Estate, Blockchain and the Quantity Theory of Money

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It would be interesting to consider how Keynes's quantity theory of money could impact the real estate industry and corporate finance in general.

Real estate investment trusts Today, there are many types of real estate investment ventures and funds looking to take advantage of tokenization, and one of the most relevant use cases are real estate investment trusts, some of which are listed on the biggest exchanges in the world, while others are public but nonlisted or private.

In general, a REIT is an entity that combines the capital of many investors to acquire or provide financing for a diversified portfolio of real estate investments under professional management.

According to the National Association of Real Estate Investment Trusts, there are about 1,100 REITs that have filed tax returns in the U.S., and collectively own more than $3 trillion in gross real estate assets across the country.

While REITs are just one of many types of investment vehicles, and there is an entire galaxy of real estate ventures and investment funds looking to take advantage of distributed ledger technology, in my opinion, specifically nonlisted and private REITs may stand to reap the greatest benefits of tokenization.

Returning to blockchain technologySo, what does tokenization potentially mean for the real estate sector? This industry, more than most, falls victim to the illiquidity discount, which can invalidate the sector from investment companies that need a certain degree of liquidity in their investments.

Firstly, through the utilization of blockchain technology, conventional and highly regulated real estate investment vehicles can operate at unprecedented levels of efficiency by making programmable governance and built-in regulatory compliance possible on the platform and/or the security token levels, as well as by automating cap table and investor management processes.

It remains to be seen when - or if - tokenization will help traditional types of private real estate investment vehicles to qualify as viable short-term investments, but there is a good chance that they could receive this distinction, especially in local economies, thereby bolstering the overall demand for real estate investments.

As long as the demand for residential and commercial real estate assets stays strong, it is fair to speculate that, at least at a macro-level, demand for tokenized real estate investments will only increase compared to other types of private equities.

He is the chair of the Real Estate Working Group at the Wall Street Blockchain Alliance, a member of WSBA's Legal Working Group, serves on the New York board of directors of the International Real Estate Federation, and has special consultative status with the Economic and Social Council of the United Nations.