DigiShares

Blockchain: The Technology Revolutionizing the Real Estate Industry

On September 12th, DigiShares, PropTech Denmark, Green Building Council Denmark, and Byggesocietetet held an event in Copenhagen aimed at informing the audience about why blockchain is more than just a current fad and has the possibility of revolutionizing the real estate market.

Presentations from the conference can be obtained here.

Videos from the conference can be viewed here.

(Some of the presentations and videos are unfortunately in Danish)

Topics ranged from the basics of blockchain presented by Bo Hembæk Svensson, Blockchain Specialist at BlocNordic, who got the less-informed audience members up-to-date with the concept, to more in-depth topics such as the value proposition in a blockchain-based market and the associated opportunities and potential challenges.

One of the advantages leveraged by blockchain in the real estate industry is fractional investment and ownership, as, through the technology, shares in properties can be digitalized. Investors, thus, benefit from accessible and liquid assets and diversified portfolios. Moreover, transactions are faster, cheaper, and more transparent, as trades are executed electronically and become disintermediated.

During the event, DigiShares’ CEO, Claus Skaaning, presented their solution, a platform that enables the issuance of such digitalized (tokenized) assets, for instance shares, bonds, or real estate.

Mette F. Kibsgaard, CMO and co-founder of DigiShares, highlighted the technology’s contribution to UN’s sustainability goals. Blockchain enables the tracking of sustainable building materials and key features, such as air and water quality, sanitation reports, or renewable energy production and consumption.

Among the speakers was also Juliane Sloane, a former analyst from the US company Leaseum Partners, who introduced a case study on a $250M tokenized real estate fund. During the discussions she pointed out, that the technology can’t increase the value of the traded property, its underlying quality being the true determinant of it.

Other speakers included MakerDAO‘s Head of Integration, Lasse Birk Olesen, who explained how tokenized real estate can be used as a collateral for their stable coin, and Niels Falk, CEO at HD Lab, who talked about several exciting blockchain projects in the building industry.

However, the innovative technology doesn’t come without challenges. Claes Holm-Nielsen, commercial real estate legal advisor at Accura, and his colleague, Peter Brask Tind, a lawyer in IT and personal data, mentioned that there are legal issues that have to be taken into consideration. One of the main challenges is deciding on the laws that will underly the blockchain deals, so the promised transparency that comes with the adoption of the technology can be conferred. This is particularly relevant for international trades involving different types of investors. Hence, the two lawyers suggest that the deals should be supervised by an independent authority, that would ensure that transactions are conducted as planned.

More information about the event can be found here and at DigiShares events

About DigiShares
DigiShares provides a platform for issuance and post-issuance management of tokenized securities. It helps with the initial design of the security token such that it fulfills the requirements of the issuer jurisdiction, using the most popular security token protocols and helping ensure that the token may later be traded on forthcoming security token exchanges.

DigiShares is your trusted partner to ensure that your digital shares will be compliant and liquid.

DigiShares is currently conducting its own STO, learn more here.

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Tokenize Your Real Estate

Many of our current projects are real estate tokenization projects, and for those of you who are specifically interested in real estate tokenization we have created a special page where you can learn about real estate tokenization and how to tokenize your project.

New technology is Working to Make Real Estate Agents and Advisers Redundant

Article taken and translated from here.

Blockchain technology can push the real estate industry far into the digital age. And the industry needs a push, says the network Proptech Denmark.

ØRESTAD – Imagine the real estate industry without brokers and where everything goes digital with the help of digital currencies and real estate deals where only the parties involved have access to data.

This may sound like something that is far off in the future, but in fact, it is not that distant when listening to some of the players currently trying to incorporate the technology into the Danish real estate industry.

Several of them are already experimenting with blockchain technology and how to leverage it in various areas of the industry.

Blockchain
A technology built by cryptographs (block) that are linked together (chain). It makes it possible to gather large amounts of information that are endlessly copied and make them impossible to falsify. Only those who have access to the blockchain through their own computer are authorized to modify the chain of information. This means that real estate deals can be rendered more secure, as only the parties involved can access the prospectus or the owner’s register. Blockchain technology can be termed as an extra “layer” on the Internet as we know it today.

New Thinking Is a Must
The real estate organization Proptech Denmark, whose mission is to push for technological development in the real estate industry, believes, among others, that Denmark lags on technological development.

That’s why last week it brought together several companies and presenters who talked about how blockchain technology can help change the real estate industry and how development and trials are already underway – both in Denmark and abroad.

“The Danish real estate industry needs to step up if we are to join the international scene. And that’s why we also have to think new,” said Proptech Denmark director Nadim Stub.

Blockchain offers, among other things, opportunities in the sale of real estate. And it could mean that the many “middlemen” involved in trades, such as real estate agents or banks will no longer be needed.

The blockchain technology is based on trust between the parties involved and does not require an institution as an intermediary, because the blockchain acts as an intermediary instead.

Specifically, this means that the seller and buyer can transpose the entire deal into the blockchain: the owner’s register, the prospectus and even the e-dna for both sellers and buyers. This allows the entire transaction to take place online, and it can make it easier, faster, and cheaper, as it does not require paying fees to intermediaries or waiting for due diligence processes.

The Technology in Its Early Days
Pilot projects with such trades are already underway. For example, the Swiss Exchange has given it a go, and in spring launched an ecosystem that can handle digital assets.

In Denmark, the digital companies DigiShares and HD Lab are also trying to implement the blockchain technology, and soon DigiShares will start a trade for approx. 22 million DKK in New York.

However, Juliane Sloane, an analyst from the US company Leaseum Partners, pointed out during the conference that if one wishes to trade through blockchain technology, the technology is not enough. High-quality assets are also required.

Several of the presenters, including Niels Falk, CEO of HD Lab, who has also been working in the field, mentioned that, currently, this innovation is still in its early days, as the Internet was in the late ’90s when a modem was needed.

Legal Challenges
But the future of blockchain in the Danish real estate industry is not without challenges. Claes Holm-Nielsen, commercial real estate legal advisor at Accura, points out that there are legal issues that have yet to be resolved.

His colleague, Peter Brask Tind, a lawyer in IT and personal data, explained during his presentation that the biggest challenge is how to decide what laws blockchain deals should be based on. Especially when it comes to international trades, where there are several types of investors, or when there are conflicts between traders.

“When you choose to use the blockchain, some laws that you trust must work so that there is full transparency when deciding which rules to apply in solving conflicts”, said Peter Brask Tind.

Besides that, there are other challenges such as financial tracking, taxes, personal data and, not least, who is responsible if there are technical issues with the blockchain. Therefore, the two lawyers suggest that there should be a self-driving unit independent of the trade, which is self-owned and can, thus, ensure that the deals are conducted as intended.

DigiShares is currently conducting its own STO, learn more here.

DigiShares Announces White-Label Multi-Project Platform for Security Tokens

European digital assets technology provider DigiShares has announced the release of their new white-label multi-project platform. The platform is a major upgrade from the previous more limited single-project platform. The new platform can handle the issuance, purchase and ongoing token holder management processes for multiple projects as once, and can also be configured for single-project situations.

Security Token Offerings (STOs) are essentially a blockchain-powered capital raise where tokens representing securities are issued to investors. The STO exploits the power of the blockchain to enable fast and efficient purchasing and trading, access to a global infrastructure with investors, custodians, and exchanges, and increased security and transparency on securities processing. The STO market is growing extremely fast with massive inflow of VC capital, massive interest from incumbents, and with an expected CAGR of 59%.

DigiShares is a provider of white-label technology for the STO market, for companies wanting to conduct their own STO, and for companies that want to offer STO services to their own clients. Using the new multi-STO platform, companies can create investment portals under their own brand, for specific application areas, such as startup financing, real estate projects, renewables projects, etc.

The DigiShares platform offers functions for investor verification and approval (through KYC and AML), token purchase and settlement, e-signatures, always 100% updated token holder “cap tables”, voting, distribution of dividends, company news distribution, freezing and renewal of lost tokens, etc. The DigiShares platform is blockchain agnostic and works out of the box with Ethereum- and Stellar-based digital asset protocols. Others can be supported quite quickly based on customer request. The platform is also “security” agnostic and can support shares, bonds, loans, etc. and any type of security that can be tokenized, as well as utility tokens with security properties.

The platform is customizable to work in any combination of jurisdiction and investor domicile. The KYC/AML process will be designed from the start to support the relevant combinations, supporting retail, experienced/accredited/sophisticated, and institutional investors. The platform has a content management module where the administrator can upload content in order to design the layout for different STO user-facing pages. The platform supports payment with both crypto and fiat, through integration with Transferwise and future PSD2 banking integration.

Many issuers are interested in dual capital raises where they target both crypto & blockchain investors, as well as traditional non-blockchain investors. The DigiShares platform supports this scenario as both tokenized and non-tokenized investors can participate in an STO. A tokenized investor is an investor who receives a token to represent the ownership of the security. A non-tokenized investor is an investor that is fully managed off-chain, meaning his/her investor relationship is managed as digitally as is legally possible — and otherwise paper-based and manually outside the platform. This ensures that no issuer will have to bet their fortunes on a successful STO but can hedge their bets and approach also traditional investors.

Finally, the platform provides a mini-exchange functionality with OTC-like trading capabilities. This allows issuers to offer their investors a limited trading capability and limited liquidity within their own network and community. The mini-exchange also allows for new investors to be invited in and white-listed such that they may purchase tokens from existing investors. This can support scenarios where existing investors want to exit and offer their tokens for sale.

About DigiShares
DigiShares provides a platform for issuance and post-issuance management of tokenized securities. It helps with the initial design of the security token such that it fulfills the requirements of the issuer jurisdiction, using the most popular security token protocols and helping ensure that the token may later be traded on forthcoming security token exchanges.

DigiShares is your trusted partner to ensure that your digital shares will be compliant and liquid.

DigiShares is currently conducting its own STO, learn more here.

Claus Skaaning CEO of Digishares

Originally posted here by Antoine Tardif:

You were previously the COO of Venturefusion – a crypto-security ecosystem for startup creation and growth. How did you transition to becoming CEO of DigiShares?
The vision of VentureFusion is to create a decentralized incubator platform for startups. It will work as a collaboration and bootstrapping platform where founders can tokenize the equity in their startups (even if no legal unit exists) and use the equity tokens as a means of payment for anyone that contributes to the startup. Founders can then make a plan for how much equity they want to spend to get various parts of their startup developed, making individual equity token allocation plans for short-term contributors such as freelancers and long-term contributors, such as co-founders and permanent team members, under vesting conditions. VentureFusion is still an ongoing active project but it primarily managed by my co-founder Yuriy Zubarovskiy these days.

VentureFusion prompted us to look at how to tokenize equity and in early 2018 this was a relatively new concept. We went to some of the first conferences in Europe on the concept and decided to create a new project, GoSecurity, which would focus on tokenization of securities. This project later re-branded to DigiShares and I became the CEO. It is now my primary focus to manage and develop DigiShares.

Could you elaborate on the services that DigiShares offers?
DigiShares is one of the leading providers of white-label infrastructure for securities tokenization issuance and management in Europe. Our first product was a single-project platform for issuance and longer-term management of tokenized securities, and we are just releasing a major upgrade that can handle multiple projects with a lot more functionality. We are one of few companies in Europe – and the only one in the Nordics that can provide an operational platform of this type.

Our platform can handle the complete workflow of an STO (security token offering), from investor registration, verification (KYC/AML), approval, to the actual purchase of tokens with fiat or crypto, signing of contracts (e-signatures), token holder cap table overview, communication with token holders, voting (shareholders’ meetings), payment of dividends, etc.

For tokenized equity, we offer a unique function where we allow a proportion of shareholders to be non-tokenized, i.e., as digitized as possible but not tokenized, so with no tokens issued. This is by customer request as some of our clients have voiced concerns that they would like to approach both crypto and non-crypto investors – and non-crypto investors may prefer a non-tokenized registration. Another unique function that we are working on is a mini-exchange, an internal OTC-like trading platform for the token holders within a single project.

Overall, we provide solutions to enable anyone to conduct their own STO or offer a number of simultaneous STOs. We primarily work in white label partnerships where clients offer the solution under their own brand name.

In addition to providing the software, we also provide access to the security token ecosystem. We have a big network of partners for legal, investments, custody, KYC/AML, etc. Some of these are integrated into the platform.

Digishares is one of the few companies in the industry that is headquartered in Denmark. Do Danish securities regulations support the digitization of shares?
While we are based in Denmark and concerned about local serities regulations, it is important to state upfront that we are jurisdiction agnostic and can operate from any jurisdiction. Indeed we have ongoing projects in both Europe and the US.

Locally, we are working with a Danish lawyer and the Danish regulators to establish whether shares can be represented as tokens. So far, our lawyer has established that tokenized shares are supported by Danish legislation but some details need confirmation from the regulator and the Ministry of Industry, Business and Financial Affairs. DigiShares has applied to participate in the sandbox of the Danish regulator to further analyze how tokenized securities can co-exist with Danish law.

Some countries do not support the tokenization of shares since they require either paper-based stock certificates or notarized trading. Fortunately the Danish securities legislation supports digitization of shares and has neither of those requirements.

The ability to tokenize shares (and other types of securities) is of course important for DigiShares and for Danish companies, but it will have importance outside of Denmark as well, since securities that are issued in Denmark can be passported to any EU member state. We believe Denmark could be a good STO destination for the above reasons – but also because we believe other typical STO costs can be significantly reduced here (incorporation, legal costs, etc.). As an added benefit, Denmark is a highly trusted financial jurisdiction with one of the lowest levels of corruption in the world.

How is the security token ecosystem and community in Denmark?
It is as of yet quite small but we are doing our best to develop it with regular conferences in Copenhagen. We’re organizing an annual conference focused on tokenized securities (Fintech Disruption Summit) and regular events on different types of tokenization, next time on September 12 with a focus on real estate tokenization.

We are presently the only Nordic company with an STO issuance platform and we are also the first to conduct an STO. However, we expect others to join us soon.

You’re currently in the process of raising funds for your own STO. How much are you raising, and what benefits will investors receive?
We are raising just below EUR 1 M. This relatively low limit was set to enable us to approach retail investors and market the STO publicly across Europe. In addition, we’ve filed a form D in the US so we can approach US accredited investors. European regulations is more flexible than the US and enables us to make a more “democratic” STO since we are allowed to target retail investors in almost all European countries.

We have designed our STO so investors receive common stock in the company with exactly the same governance rights as founders, similar to a standard IPO. Many STOs design “handicapped” tokens with quite limited governance rights for investors but we didn’t want to do that. In general, we believe it will be a problem for the STO industry if issuers keep creating tokens with very limited investor governance rights.

What are the plans for the raised funds?
The raised funds will be used to speed up our development & marketing efforts. In addition, there are certain licenses we would like to obtain in order to extend the scope of our business. In general, we are seeing more leads & opportunities right now than we have the resources to exploit.

You are arranging an event on tokenized real estate in Copenhagen on September 12. Do you see real estate as being the most promising asset class to be tokenized?
Yes, if you look at statistics and speak to industry experts, there is consensus that real estate is the biggest homogeneous chunk of the STO market right now. So currently, we are directing our marketing and development efforts in this direction. Our real estate tokenization event will be attended by around 100 real estate professionals from the Nordics. 90% of them are non-blockchain people that we hope to motivate and inspire to adopt blockchain. In general, we don’t go to many blockchain industry events but rather spend our efforts on the traditional financial & real estate industries.

We hope to announce a real estate STO quite soon, and we are also involved in a really exciting project about creating Eurasian security token exchanges.

What other asset classes will you be focusing on?
Through partners we are also looking at debt and bonds, but we are primarily focused on equity at this stage. The platform can handle any type of security.

Where do you see the industry being in 5 years and the role of DigiShares in this industry?
We currently see two major trends; one with startups attempting to create a new parallel financial infrastructure and another with incumbents adopting blockchain and approaching the new opportunities in their own speed. These two trends will eventually merge and a new financial infrastructure will emerge where some old financial institutions will still exist and some of the new players will be established as leaders. We will see just one or two main security token protocol standards. The consumer (investors) are the real winners with much decreased fees for trading, decreased interest rates for debt, increased interest rates for deposits, faster and more efficient financial operations, etc., etc.

Security Tokens Are Not All Created Equal

Claus Skaaning: 26-08-2019

Security tokens are tokens with a security property, for example revenue sharing voting rights. In some cases they resemble shares, and in other cases bonds and other familiar security types.

Security tokens were in practice invented by the United States Securities and Exchange Commission (SEC) who was struggling to classify the flood of crypto tokens being issued in 2017 and 2018. The companies creating the tokens hoped that they would be treated as as outside securities regulation as “utility tokens.” However, this proved to be a false hope.

Some tokens had classic properties associated with securities such as profit sharing or voting rights while others in more general terms offered “security like” profits over time to investors. Almost all of them were deemed to be securities falling under security regulations. Recently, the SEC has identified a few very obvious cases where tokens were not being sold to raise capital or the tokens were not offering any kind of investment return, etc.). Hence security tokens as a category was created and innovation could proceed in new directions.

The categories of utility tokens and security tokens still exist but are useful in only some jurisdictions. In the US almost all tokens are issued as securities even for quite clear cases of utility tokens but in many European and Asian jurisdictions it is still possible to issue well-designed utility tokens to offer potential investment profits in the future while evading securities regulations.

Innovation is going in many directions. While some are focused on developing optimal representations of old-fashioned types of securities like stocks and bond on the blockchain, others are inventing new types of securities that may either be more limited or more complex. The fact that securities can now in many countries be fully issued and managed with software increases the design scope for securities enormously and suddenly makes it possible for a broader range of people from outside the financial world to have influence on the design of securities.

DigiShares is focused on porting traditional securities to the blockchain because these securities have been developed over hundreds of years and their properties are very well understood by both issuers and investors. These traditional securities have the same investor protections as non-blockchain ones. Our innovation is primarily focused on automating procedures relating to issuance, management and trading of tokenized shares, bonds, assets and debt-instruments.

Other companies are focused on designing new types of securities that are designed to specific applications, such as the production of films or the financing of real estate projects. These securities can be designed so they precisely match the life time and the money flows of the underlying asset. For instance, a real estate security token can handle the regular payout of rent to investors, and a film production security token could take into account the life time value of the film where most of the value is produced in connection with the release. Such tokens create value since they more closely reflect the nature of the specific application. This makes them easier to understand and evaluate than more generic types of securities.

Where innovation goes wrong is where the new design scope of security tokens is abused to create more simplified and issuer-friendly tokens. When issuing tokens to raise capital, it is extremely easy and tempting to design the token so the issuer’s rights are increased and the investors’ rights are decreased.

We have seen many examples of this in the recent wave of STOs. Indeed it seems a large proportion of current STOs sell a security to investors that is more limited than a standard share or bond. While many STOs could easily issue standard tokenized shares with full voting rights, dividends, pre-emptive rights, buy-back rights, or piggybacking rights they have chosen to issue much simpler tokenized securities as a “revenue sharing right” or a “profit sharing right” and nothing else. In some cases that we have reviewed, the issuer management even withholds the right to distribute these “dividends” so the “shareholders” have no guarantees of seeing a profit in the future. Utility tokens disguised as security tokens may be even worse, as they masquerade as securities while offering no governance rights at all.

We hope that regulators will catch up and start looking at security token design to uphold consumer and minority shareholder protections. We also hope that industry players such as forthcoming security token exchanges will make it easy for consumers to determine the qualitative differences between tokens with different degrees of rights. A starting point could be to classify tokens as shares, bonds, or other traditional security types, or more limited simplified tokens with only revenue share or profit share, so that the difference is clear to investors.

Hopefully the market itself will build into the price of traded securities whether they are securities with full rights or handicapped versions such that issuers are incentivized to act in the best interest of consumers and shareholders.