DigiShares

New Client with an Exciting Real Asset: Whisky as an Investment Object

DigiShares recently signed up a new client, Faer Isles Distillery, Faroe Islands. We are working hard towards launch of their white-label platform for tokenization of whisky within the next weeks.

Faer Isles Distillery is a craft whisky and gin distillery startup on the Faroe Islands. For a craft distillery wanting to produce high-quality malt whisky and super-premium gin, the Faroe Islands in the middle of the North Atlantic are an optimal location. The salty, windy climate on the islands provides the perfect atmosphere for whisky maturation, and the surrounding nature provides the optimal botanicals for gin production. As a new whisky destination, the project has gained a lot of international coverage, e.g., in the largest whisky publication in the world, Whisky Advocate, read the full article here.

Faer Isles Distillery received some initial funding and community support by offering membership in their Founders’ Club. 1100 whisky and gin enthusiasts from 22 countries registered. Within the next month, Faer Isles will start their crowdfunding campaign, which will be issued as an STO offering digital shares as tokens. This will make them the first whisky distillery in the world to use the STO format and allow crypto currency payment for shares.

Faer Isles Distillery was founded by local whisky enthusiasts. Since then, a group of investors, business developers, and industry specialists have joined and formed the team behind the project today. Test production has been performed for a few years, and the first commercial products will be launched this year.

You can learn more about Faer by visiting this link.

A new client - Faer and its products - Whiskey and Gin

Digital Securities & Tokenization Summit

We are proud to announce the third installment of the conference, previously named Fintech Disruption Summit, and still available.

The Summit has traditionally been visited by 100-200 delegates. First time it was physical but the last one was virtual, as will this one be. We are aiming for 250-500 delegates this time around.

The goal with the Summit is to educate and motivate the traditional financial industry to adopt blockchain and tokenization technology, so delegates will be non-blockchain non-crypto people from the traditional industry. The Summit spans two days and the schedule has been adjusted to cover both EU and US delegates and speakers.

We will market the Summit massively through our channels as well as the channels of our partners and sponsors. The goal is to make it one of the top global events focused on tokenization targeted towards the traditional industry. There will be tracks focused on legal, market status, future visions, real estate tokenization, etc.

Stay tuned for updates in the newsletter.

An advertisement for a Digital securities and tokenization summit

Interview and New Client

Interview with our CEO

Our CEO participated in an interview with a famous Danish TV personality David Guldager. The interview was organized by the Danish organization CopenX which is a network of technology leaders. The topic was blockchain and its business applications and our CEO was joined on stage by Michel Avital, professor at Danish business school CBS.

The full webinar and interview can be watched here.

(Please note that the first couple of minutes are in Danish, but the webinar switches over to English language after a few minutes. There are also initially some sound problems but these are rectified later in the webinar.)

New Real Estate Client: BAHGS Fund, USA

DigiShares recently signed up a new client, BAHGS Fund, USA. We are working hard towards launch of their white-label platform for tokenization of real estate within the next weeks.

Economic Empowerment, Economic Growth and Generational Wealth meet Blockchain Tokenization

Founded in April 2020, BAHGS Fund is a blockchain-based marketplace that leverages tokenization technology to fractionalize ownership of affordable residential real estate, making investments more affordable. Sponsors and private investors now have early liquidity options through the issuance and tradability of asset-backed digital securities. Drawing on the team’s deep expertise in real estate, finance, and technology, BAHGS Fund is providing leading-edge capital market solutions for the $54T global industry.

BAHGS Fund will soon announce their first phase of residential and mixed-use properties to be listed on the DigiShares platform.

BAHGS fund and its logo

This will be the first public offering of security token offerings (STOs) backed by Affordable Residential Real Estate at this scale. Historically, Qualified Opportunity Zones are underserved communities across America’s rural and urban areas. The TCJA has incentivized capital gains investments in Qualified Opportunity Zones with a social impact. How do you know if your investment has a social impact? How profitable will your investment become? By Investing through the BAHGS Fund’s platform, small investors can invest alongside major institutional companies with similar investment goals.
By using blockchain, the crowdfunding impact will allow non capital gains investors to reduce the initial investment cost, allowing them to diversify their capital into multiple projects instead of one, without the historical requirement of holding them for 3-10 years before exiting.

For more information on BAHGS Fund, please visit their website.

We will share more information about this project in a forthcoming press release.

The GameStop fiasco showed us how stock trading is broken. Security tokens could fix that

— Fortune, Feb 2nd 2021

New Clients and New Territories

Good Progress
DigiShares is making good progress. Over the past month we have added several new white-label partners who are initiating tokenization activities in their own country. Recent clients work with equity crowdfunding, real estate, and other types of assets. They are based in the US, Europe, and Africa. Several of these will be announced in future newsletters.

At the moment we are seeing very significant interest in our white-label tokenization platform. Our recent partnership with Polymath has spurred further interest and within the next few weeks we expect to announce a partnership with another industry leader. One of the great benefits of the security token industry is that everyone collaborates on developing the value proposition, putting together the pieces of the ecosystem, and improving the joint marketing into the traditional financial industry.

For those that do not know, DigiShares provides a white-label tokenization platform for issuance, corporate management, and internal trading. We differentiate by having an attractive white-label partnership model, as well as sophisticated functionality for share cap table management, investor portal, OTC trading, and investor corporate management. We work with legal partners to provide a turn-key offering and can normally set up a new white-label platform within 1 month.

Protocols
Still more than 90% of all tokenization occurs on the Ethereum blockchain, despite poor performance and high gas fees. To avoid high fees, tokenization providers are forced to adopt inferior designs such as the omnibus approach to wallet management where all tokens of all investors in a single project are stored in the same wallet. This eliminates many internal transactions for transfers and trades and cuts the gas fee for these transactions down to zero. Only in the case where the investor removes his/her tokens to an external wallet, will there then be actual gas fees. The token industry is slowly converging to protocol standards that are open, flexible and inexpensive to use. As a Polymath partner, we are rooting for ERC-1400 and will also support Polymath’s forthcoming non-Ethereum based protocol Polymesh.

New Territories
One of the reasons for the sudden explosion in the tokenization space is most likely the increased regulatory openness to tokenization. More and more regulators are interested in supporting tokenization and are increasingly clarifying how securities and associated transactions can be digitized and completed without touchpoints to banks, CSDs, notaries, the tax department, etc.

DigiShares is constantly monitoring the development of global regulation and currently supports tokenization in these countries:

  • USA: primarily out of Wyoming and Delaware
  • Singapore
  • Switzerland
  • Liechtenstein
  • Estonia
  • The UK
  • Germany

More countries are being added to the list every month. We are involved in dialog with regulators in several countries in order to fast forward the regulatory process. If you are interested in our help for this, please reach out.

In those countries where tokenization is not yet fully legally clarified, there are other options for how to proceed. One is to use the DigiShares solution without tokenization and just use it to manage uncertificated shares – essentially the share cap table then determines the ownership of the shares and it will be managed by the company admin via the DigiShares platform. So, investors will initially not get tokens and will have to wait for legalization before these can be issued. The other solution is to work with another instrument such as debentures or bonds. These are less demanding on the regulatory side and possible in many more jurisdictions. However, the investor interest may not be as high as for pure equity.

« The security token market cap grew by over 500% in 2020, and the best is still yet to come. I believe this number will continue to grow significantly, reaching over two billion dollars by the end of the year. As larger institutional firms continue to enter into the security token industry, I think we’ll see funds enter this space in a big way in 2021. I predict that over $100M will be raised by security token offerings this year. Worldwide exposure to real estate, private equities, and the hundreds of other security token use cases including art, luxury cars, and sports teams is now possible»
The Security Token Industry in 2021

Real Estate Tokenization Explained

Real Estate Tokenization Explained

Tokenization is the concept of representing the ownership of securities (company equity, bonds, etc.) as tokens on the blockchain. These tokens are called security tokens, tokenized securities, or increasingly digital assets or digital securities.

Real estate is the single biggest asset class that may be tokenized. Total real estate is worth around $228 trillion today and only 7% of this is available to retail investors. However, more than 80% of people believe real estate to be a good investment. DigiShares aims to help close this gap.

The blockchain itself is a global network that allows individuals and business entities to transact directly with each other in an efficient and inexpensive manner, without using intermediaries as banks and notaries. With tokenization, real estate assets can be represented as tokens on the blockchain that will become as efficient and inexpensive to issue, transfer and trade as other cryptocurrencies.

Tokens on the blockchain can be self-custodied. This means that investors can safekeep their own assets in their own wallet (similar to a bank account on your mobile device or computer). Or they can choose a custodian to safekeep their assets. Custodians are like banks as they provide safe and insured storage of digital assets. However, they are compatible with the blockchain, provide APIs, and are generally quite inexpensive.

Tokens on the blockchain can also be transferred and traded in a peer-to-peer fashion. This means that any investor can directly transfer or trade with any other investor. The transaction itself does not need to be mediated by any middleman (bank, CSD, notary, etc.) but the blockchain itself makes sure that the transaction is settled correctly. The blockchain can even remove any counterparty risk, something that normally requires an expensive intermediary, such as an escrow account with a lawyer. The direct trading removes a lot of friction and makes securities processing on the blockchain highly secure, efficient and inexpensive.

real estate tokenization

Real estate is highly illiquid but through tokenization, it becomes possible to directly transfer and trade real estate assets to other investors in a very inexpensive and efficient manner. Platforms such as the one provided by DigiShares make this possible and maintains a fully updated share cap table at all times.

Real estate processes are also traditionally very cumbersome and paper-based, involving a lot of manual steps with banks, notaries, etc. With blockchain-based processing of real estate assets, it becomes possible to digitize and automate many of these processes to a much higher degree. With a platform such as the one from DigiShares, these processes can be fully automated:

– Registration of new investors and collection of required information. The actual verification of this can be outsourced to a third-party KYC provider for USD 2-3 per check

– Purchase of shares and investment into the property. The purchase process can be fully automated, allowing the transaction to occur with no manual processing at all. The share cap table is automatically updated after the purchase is completed

– Payment of dividends and interest. By clicking a single button, it becomes possible to pay out to all investors at once, based on a predefined allocation formula

– Trading of digital assets. DigiShares provides a built-in OTC marketplace where investors can trade with each other. No manual processing or participation from the real estate administrator is required.

The very high degree of automation makes it possible to have hundreds of investors in real estate projects unlike today where the number of investors is often limited to below 10. This in turn makes it possible to “fractionalize” and allow investors to participate with $1,000 or $10,000 size investments.

Only a few “accredited” investors may have the normally required $100,000 or EUR 100,000 to invest into a real estate project, but many more investors may have $10,000 or EUR 10,000 to participate. This opens up the market to new types of investors for the real estate developers and it will become easier to finance good projects.

It also allows a much higher percentage of the population to participate in real estate investments and develop a more professional investment strategy to diversify and protect their savings over the years. This is called “democratization” of real estate.

With the DigiShares white-label platform, real estate developers will get a structured platform that enables them to expedite and manage processes related to financing, refinancing, or selling real estate development projects. In addition, they will be able to efficiently and consistently manage a group of owners of a specific project with all that entails – the maintenance of the share cap table, the facilitation of shareholder meetings, the payment of dividends or interest, and the reissuance of lost tokens, etc.

If you are interested in learning more, please contact DigiShares at [email protected]