Gu Yanxi: Blockchain technology can promote the global circulation of real estate and other assets (www.blockcast.cc)

The global circulation of assets supported by blockchain technology is no longer a theoretical discussion, but is carried out in different regions of the world.

Original title: “The global flow of digital assets has now begun”
Written by: Gu Yanxi, founder of the American Liyan Consulting Company, a researcher and practitioner in the blockchain and encrypted digital asset industry

In the current global capital market, the cross-border flow of assets is still very inconvenient. Among the various factors that restrict the flow of assets on a global scale, the main reason for hindering the flow of assets is the relevant policies of various governments. In addition, there are many operational and technical reasons. These reasons include the representative form of the asset, the feasibility and convenience of the user’s asset account opening when crossing borders, the efficiency and cost of transactions, the authenticity and guarantee of the asset, and the availability of asset information on a global scale Sex and so on. For some asset types, the quality of these assets is high and the total amount is very large. However, since each asset’s individual volume is not large, in terms of the circulation of the secondary market, even within a regulatory jurisdiction, there is no Very good circulation. In this regard, the most representative asset is real estate.

The lack of asset liquidity is very detrimental to both buyers and sellers of assets. The holder of the asset can only rely on the income generated by the asset itself, or the income obtained when the asset is sold as a whole. The utilization value of assets is very low. In contrast, company equity has a very strong advantage in this respect. Holders of company equity can either receive regular dividends from the company’s operating income based on the equity they hold, or they can sell part of their equity in the secondary market to meet their funding needs. Since equity can be listed and traded on a global scale, the liquidity of equity holders’ assets is very good. For buyers worldwide, they also have the opportunity to obtain the equity they wish to own in the exchange. For purchasers of equity, they can use local legal currency to open equity trading accounts on local exchanges to purchase and hold equity in other parts of the world. Such a transaction process is much more convenient.

The current transaction mechanism based on the centralized computing system, due to its high cost, has so far not been able to trade a single relatively small asset, such as real estate. Real estate can only be traded in the secondary market through REITs, and only when a very large asset package can be made can it be listed and circulated on the exchange. The scale of such asset packages is usually above 10 billion yuan. Only such an asset volume is worthy of circulation and trading in the secondary market. So far, no single real estate has been traded and circulated in the secondary market, let alone traded and circulated on a global scale.

The emergence of blockchain technology allows us to certify various types of assets and trade them in the secondary market. Financial services based on blockchain technology can be obtained globally. On top of it, digital currency can be used for direct digital asset transactions. It supports direct transactions between peers, as well as centralized matching transactions. Due to these basic characteristics, more types of assets can be traded and circulated on a global scale through tokenization. The cross-border transaction and circulation mechanism of assets is far superior to the existing mechanism. And such a way of circulation has now begun on a global scale.

In 2018, the U.S. market has begun to use security tokens to certify certain types of assets for trading in the secondary market. These asset types include real estate and private equity funds. However, the market in this area had just begun to take shape at that time, and some important basic components of the market had not yet appeared. Therefore, efforts in this area did not immediately succeed. Today, two years later, the underlying market infrastructure has been further improved. The development in this area began to show a trend of rapid development. And this development is no longer limited to the US market. There have been attempts in Singapore and Thailand.

In 2018, a basic component missing in the market was the guarantee mechanism for the same digital form of physical assets. Among the asset class of equity, the institution performing this function is the securities registration company. However, for other types of assets, there is no organization that specifically provides this aspect. Although some types of institutions can provide this service, such as the transfer agent in the US market. However, since there was no demand in this area before, the service in this area was lacking in the market. But in today’s American market, transfer agents have begun to provide this service. And on the basis of technical support, provide such services in a reasonable business model. Since this kind of service provides the market’s demand for this kind of service, it has become a major factor in promoting the digital business of real estate. The market in this area has begun to develop rapidly.

Compared with the development in 2018, the current development has a stronger trend of internationalization. Real estate in one area is represented in another area in the form of security tokens, and then sold to purchasers in the third area. And all of this is carried out in accordance with a feasible business model within the scope permitted by supervision. For example, there are attempts in the market to politicize real estate in Canada and circulate transactions on trading platforms in the United States. The customer groups that can participate in the purchase include users in Latin America. Assets such as real estate thus realize cross-border circulation transactions. Similarly in Singapore, there are also attempts to trade and circulate Japanese single real estate on the secondary market based on a tokenized method. The purchase users of such assets can also be users outside Singapore.

In short, the global circulation of assets supported by blockchain technology is no longer a theoretical discussion. After two years of development, there have been newer developments in this area, and they have been carried out in different regions of the world. The digital financial ecology based on blockchain technology is the development trend of the financial market. The cross-border flow of digital assets is one of its application scenarios. Tokenization of real estate and cross-border circulation transactions is a specific application scenario. Due to the network effect of the digital financial ecology, once the ecology develops, the ecology will have a very strong cohesion for the users participating in it, and at the same time will attract more users to join the ecology. The circulation of digital assets in this ecology can therefore form a positive interaction with the increase in the number of users. This will also encourage more types of assets to be produced and circulated in this ecology.