Catalyzing real estate investments with blockchain technology
Today, the real estate investment industry suffers from the following pain points:
Cumbersome and costly investors registry maintenance
High minimum tickets of investment, low numbers of investors, and expensive underlying assets
Isolated secondary markets that continue to rely on manual processing
Leveraging blockchain technology realizes several corresponding solutions and additional advantages:
Faster, simpler, and cheaper issuance of digital securities, enabling greater levels of product customization and providing access to new classes of investors
Cheaper, more secure, and more efficient fund administration from automated and real-time transaction processing
Reduced information asymmetry between network participants, offering a “single source of truth” across the ecosystem
French real estate fund management company, Mata Capital, sought to adopt blockchain technology in order to optimize the processing of securities registers for its real estate investment products. It partnered with ConsenSys Codefi and Screeb Notaries to leverage this innovative technology to record and process some of its operations.
What are the opportunities offered by blockchain technology for real estate investment products?
Will the digitization of investment products result in the effective optimization of business processes for investment firms?
How can the investor experience be streamlined with the use of digital assets and marketplaces?
To answer these questions, Mata Capital, Screeb Notaries, and ConsenSys Codefi registered financial assets and associated rights in the form of digital tokens represented on the Ethereum blockchain.
THE CODEFI SOLUTION
ConsenSys Codefi provided Mata Capital license to its security token issuance and management platform, Codefi Assets. The team granted issuers and investors access to its customized user interfaces, and implemented asset compliance requirements, allowing Mata Capital to consult and manage all KYC (know-your-customer) documents directly on the platform.
A platform to create, issue, and manage the lifecycle of digital assets, associated markets, and digital financial instruments on public or permissioned blockchain networks
Security Token Issuance
Codefi Assets enables the easy creation and deployment of smart contracts on the Ethereum mainnet based on the ERC1400 standard, among others. The ERC1400 standard was specially created by the Ethereum community to represent financial assets on the blockchain. These highly configurable smart contracts and security tokens have the following features:
Security tokens support force transfers, burns, and mints by an administrator
Security tokens support trade restrictions through off-chain certificate generation. Token transfers are conditioned upon the validity of the certificate, offering the issuer strong control capabilities over their financial assets across both primary and secondary markets
Security tokens support partial-fungibility (i.e. the ability to create different classes of assets)
All smart contracts audited by ConsenSys Diligence
Using the Codefi white-label platform, Mata Capital is able to describe an asset, define its compliance requirements, validate the investor KYC, and issue corresponding fund shares to each verified investor upon payment validation. All this data is then safeguarded for review by future investors on the dedicated interface.
Mata Capital is able to invite investors to create accounts and engage in the following 4 step investment process:
Create an investor account on Codefi Assets
Fill in a KYC form and upload all required documents
Define the nature and number of shares to be purchased on the platform
Pay via wire transfer and receive corresponding shares upon payment validation
Diagram 1: Issuer Interface
KYC and Regulation Compliance
Investors submit their required documents on a dedicated interface on Codefi Assets. These documents are then processed off-chain by Mata Capital, the issuer, or a selected third party. Once the KYC/AML (anti-money laundering) checks are confirmed, the issuer allows investors to purchase tokens.
Diagram 2: Investor Interface
The issuer authorizes the transfer of tokens to the investors through a certificate signed using its private key.
When the transfer of tokens is completed, investors will receive a receipt of the sale detailing its characteristics (i.e. issuers, investors, number of tokens bought, and a link to the transaction on the Ethereum blockchain).
Diagram 3: Token Transaction
The ConsenSys Codefi blockchain platform licensed to Mata Capital and Screeb Notaries is operational. Thanks to their collaboration, Mata Capital is quickly and easily leveraging blockchain technology.
Currently running in production for Mata Capital, Codefi Assets effectively delivers several major features that improve data security, optimize business operations, and streamline the investor experience:
The platform securely holds the registry of shareowners for real estate funds
The platform can successfully create token representations of financial instruments on the Ethereum mainnet, on a customized interface with built-in compliance attributes
The platform allows Mata Capital and its investors to carry out all KYC and AML actions through the platform
The platform enables Mata Capital to offer investors the possibility to engage in a fund or "club-deal" operation
Eventually this platform could allow investors to easily subscribe and resell their securities over the counter
This new blockchain platform was used to tokenize a single real estate fund asset, ownership of a building located in the 15th arrondissement of Paris for an investment volume of 26 million euros.
"This is the largest tokenized operation in Europe," says Baptiste Saint-Martin. In the future, the platform's purpose will be to handle all the eligible operations of Mata Capital, which also intends to offer this white label solution to professional partners in the financial and real estate sectors.