Utility Token Issuance

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Utility tokens are digital assets that provide access to a product or service within a particular ecosystem. Utility tokens serve a specific function within a decentralized platform. They can be used for various purposes such as accessing features, obtaining discounts, or participating in governance mechanisms. Unlike currencies, utility tokens are not intended to be used as a store of value. They derive their value from the utility they provide within the specific ecosystem.

Legal Opinion about Utility Token Issuance

Ganna Voievodina

Manimama, CEO

"Utility tokens are redefining how businesses interact with their customers. Unlike securities, they grant access to a specific product, service, or platform within a blockchain ecosystem. These tokens can revolutionize customer loyalty programs, create innovative user experiences, and facilitate decentralized governance models. In a world driven by user engagement and digital participation, utility tokens are a powerful tool. Considering the potential of utility tokens for your business? Our legal team understands the unique complexities of this field. Contact us today to develop a robust utility token strategy that aligns with your goals and maximizes benefits for your users".

Benefits of Utility Token Issuance

Decentralized Applications (DApps)

Utility tokens are often integral to decentralized applications, providing users with access to functionalities within the platform.

Gaming and Entertainment

In gaming and entertainment industries, utility tokens can be used to unlock premium features, purchase in-game items, or reward players for achievements.

Supply Chain Management

Utility tokens can streamline supply chain processes by enabling transparent tracking of goods, incentivizing stakeholders, and facilitating secure transactions.

Tokenized Ecosystems

Many blockchain projects utilize utility tokens to create tokenized ecosystems where participants are rewarded for contributing to the network's growth and development.

Voting and Governance

Utility tokens pave the way for decentralized decision-making. Token holders can vote on important proposals affecting projects or organizations, leading to more equitable and transparent systems.

Loyalty Programs

Utility tokens can reinvent loyalty programs, offering flexible rewards, gamification, and more direct customer engagement. Customers can use tokens for discounts, special offers, and exclusive experiences.

Our Services

As a law firm specialising in serving tokenization projects, we are ready to offer a full range of legal services tailored to the unique needs of this rapidly evolving field, including:

Regulatory compliance

  • Support in the complex regulatory landscape of the tokenization and blockchain industry
  • Ensuring compliance with local and international legislation, including securities regulations, AML and KYC requirements

Choice of a jurisdiction

  • Researching and setting up the optimal corporate structure for tokenization projects with the right legal structure, appropriate taxes and investability

Support of token issuance

  • Drafting all necessary documents for token issuance and eliminating risks of token recognition as a security (if applicable)

Business structuring

  • Assessment of your structure, doing necessary research, further analysis and helping in empowering your plans

Marketing and advertising

  • Preparing marketing plan for your business
  • Advertising plan adjustment
  • Website creation

Use Cases of Utility Token Issuance

Utility token issuance in Thailand

The main regulation that governs virtual assets in Thailand is the Emergency Decree on Digital Asset Businesses, B.E. 2561 (2018). The Regulatory Authority - is Thai Security and Exchange Commision (SEC).

The SEC's Notification No. GorJor. 15/2561 Re: Public Offering of Digital Tokens (and its amendments) provides a definition ofUtility Tokens. Thus, Utility Tokens are electronic units created in a digital system or network that the holder can exchange for goods or services or any other specific right as agreed upon by the issuer and the holder.

The SEC proposed to divide Utility tokens into two groups and to introduce different issuance procedures, taking into account the characteristics of each group:

  • Group 1.
  • Group 2.

Utility tokens of Group 1 have the following characteristics:

  • “issued for consumption purposes, such as digital vouchers, digital gifts or points, concert ticket redemption tokens, loyalty points and non-fungible tokens ("NFTs") ; or
  • issued in the form of a digital certificate or representation of rights, such as carbon credits, renewable energy certificates, digital transcripts, title deeds, medical certificates and digital bills”.

Group 1 Utility tokens must be non-financial products and must have a designated channel or trading platform that has been made available for exchange for goods, services or specific rights offered by the issuer.

Utility tokens of Group 2 have the following characteristics:

  • tokens that grant the holder the right to access underlying products or services provided using distributed ledger technology (" DLT ") or other systems;
  • exchange tokens that will be used to obtain discounts on trading commissions or to upgrade membership levels;
  • governance tokens that provide the token holder with voting rights on decentralised funding (DeFi), centralised funding (CeFi) or GameFi; or
  • project tokens that provide services related to digital assets through CeFi.

The procedure for approving the issuance of Group 1 and Group 2 Utility tokens is different. Due to the fact that Group 2 Utility tokens have higher risk applications, their issuance procedure is a bit stricter. The process of issuance Utility tokens of Group 1 in Thailand described at the scheme:

  • Establishment of a company in the form of a limited liability company or a public limited liability company
  • Creation of technical documentation, preparation of token structure
  • Selecting an ICO portal that is licensed by the SEC to offer digital tokens
  • Token offering on the ICO portal resource

During issuance Group 1 Utility tokens it's required involving ICO portals. The ICO Portal is a provider of an electronic system to facilitate the offering of issued digital tokens. It is the responsibility of the ICO Portal to conduct due diligence on the characteristics of the digital tokens offered and the qualifications of the issuer, and to ensure the completeness and accuracy of the information contained in registration statements, draft prospectus or any other information to be disclosed through the portal.

The process of issuance Utility tokens of Group 2 in Thailand described at the scheme:

  • Establishment of a company in the form of a limited liability company or a public limited liability company
  • Creation of technical documentation, preparation of token structure
  • Prepare a draft prospectus and all necessary documents for filing a digital token offering statement
  • Filing an application and related documents to obtain SEC approval
  • The SEC verifies and ascertains the information and reports any problematic issues to the applicant for clarification within a certain timeframe
  • The applicant shall clarify the issues of concern within a specified time period set by the SEC (not to exceed 60 days)
  • The SEC will report its findings within 30 days of the date it receives the applicant's written explanation of the issues of concern

Utility token issuance in Dubai

The Virtual Assets Regulatory Authority ("VARA") has approved a system of regulations that relate to virtual assets. Thus, the entire field of virtual assets in Dubai is regulated by the VARA, including the issuance of tokens.

In accordance with the Virtual Asset Issuance Rulebook, Virtual Assets issues in the Emirates are categorized to 3 types:

  • Category 1 token
  • Category 2 token
  • Other tokens

It should be noted that VARA has no specific definition of Utility token.

Category 1 token is Fiat-Referenced Virtual Assets [FRVAs], defined as types of Virtual Assets that purport to maintain a stable value in relation to the value of one or more fiat currencies, but do not have legal tender status in any jurisdiction, as more fully defined in the FRVA Rules. In the UAE, it is not possible to issue FRVAs on AEDs as this is the exclusive domain of the National Bank.

Category 2 token is all issuances which do not constitute a Category issuance, and:

  • by or involving Designated Non-Financial Businesses and Professions (DNFBPs), which include: Dealers in precious metals or precious stones; Law firms, notary firms, Accounting, audit, or insolvency firms; Single Family Offices etc.
  • which satisfy any of the following:
    • a single transaction exceeding AED 40,000, or the equivalent amount in another fiat currency or Virtual Assets
    • offered to 150 entities or more
    • over a period of 12 months, starting with the beginning of the issuance, the total consideration, direct or indirect benefit, accrued to the Issuer exceeds AED 2,000,000

Other tokens are types of tokens that do not fall into Categories 1 and 2. Other tokens must comply with all rules contained in the Virtual Asset Issuance Rulebook that relate to General requirements (Honesty and fairness, Thoroughness, Capabilities and resources), Whitepapaer and risk disclosure, Compliance obligations.

The issuance of Utility tokens in Dubai is possible using Category 2 tokens and Other tokens. The choice of a specific category of tokens is possible after a full understanding of the business model to be implemented. To issue Category 2 tokens, an Approval of the Issuer must be obtained from VARA.

The issuance process for the Category 2 Token in Dubai

  • Company formation
  • Submitting an application to VARA with all necessary documents and policies
  • VARA checks the submitted documents and reports any problematic issues to the applicant for clarifion within a certain timeframe (if necessary)
  • The applicant clarifies problematic issues within a spesific timeframe set by VARA
  • Issuance of tokens

No additional approval from VARA is required for the issuance of Other type of tokens (which do not fall into categories 1 and 2)-no additional approval from VARA is required. However, such tokens must still comply with the requirements of Sections 2-4 of the Virtual Asset Issuance Rulebook.

    Utility token issuance in Europe according to the MiCA

    The new European Markets in Crypto-Assets (MiCA) Regulation defines the following categories of tokens and divides them into three types, which should be distinguished from one another and subject to different requirements depending on the risks they entail.

    • The first type is “e-money tokens” which consists of crypto-assets that aim to stabilise their value by referencing only one official currency. Like electronic money, such crypto-assets are electronic surrogates for coins and banknotes and are likely to be used for making payments.
    • The second type of crypto-assets concerns “asset-referenced tokens”, which aim to stabilise their value by referencing another value or right, or combination thereof, including one or several official currencies. That second type covers all other crypto-assets, other than e-money tokens, whose value is backed by assets.
    • The third type consists of crypto-assets other than asset-referenced tokens and e-money tokens, and covers a wide variety of crypto-assets, including utility tokens.

    In accordance with the MiCA “utility token” means a type of crypto-asset that is only intended to provide access to a good or a service supplied by its issuer.

    MiCA prohibits the offering to the public of crypto-assets other than asset-referenced tokens and e-money tokens, unless the issuer:

    • is a legal person in European Union
    • has drawn up a crypto-asset white paper, notified and published this white paper in accordance with MiCA
    • has drafted and published the marketing communications, if any, in respect of that crypto-asset in accordance with MiCA
    • complies with the requirements for offerors laid down in Article 14

    The requirements regarding white paper and publishing the marketing communications do not apply if:

    • an offer to fewer than 150 natural or legal persons
    • over a period of 12 months, starting with the beginning of the offer, the total consideration of an offer to the public of a crypto-asset in the European Union does not exceed EUR 1 000 000
    • an offer of a crypto-asset addressed solely to qualified investors where the crypto-asset can only be held by such qualified investors

    The above mentioned regulatory requirements doesn't apply to offers to the public of crypto-assets other than asset-referenced tokens or e-money tokens where any of the following apply:

    • the crypto-asset is offered for free
    • the crypto-asset is automatically created as a reward for the maintenance of the distributed ledger or the validation of transactions
    • the offer concerns a utility token providing access to a good or service that exists or is in operation
    • the holder of the crypto-asset has the right to use it only in exchange for goods and services in a limited network of merchants with contractual arrangements with the offeror

    In accordance with the stipulations for white paper registration outlined in MiCA, it is not obligatory for an Issuer to obtain approval prior to publication. Instead, the white paper must be made available on the Issuer's website. This regulatory approach represents a forward-thinking paradigm shift and is poised to establish itself as the leading regulatory framework for crypto-assets.

      Utility token issuance in the United Kingdom

      In the United Kingdom Utility tokens are defined as cryptoassets which provide digital access to a specific service or application (e.g. digital advertising or digital file storage) and use a technology such as DLT to support the recording or storage of data. They do not provide the rights or features associated with a security token (e.g. share or ownership rights), and do not function as a means of payment – though they can be traded on cryptoasset trading venues for investment purposes.

      Regarding the rules for issuing Utility tokens, it is predicted that they will not be subject to the requirements that are foreseen for regulated financial activities, but only if they do not accommodate the characteristics of other instruments (e.g. securitisation tokens).

      At the same time, new rules regarding the advertising of cryptoassets will be applied when issuing Utility tokens, according to the Finalised guidance on financial promotions on social media.

      Why Work With Manimama?

      • Expertise in Blockchain and Digital Asset
      • Experience with Tokenization Projects
      • Comprehensive Legal Support
      • Tailored Legal Strategies
      • Regulatory Compliance
      • Risk Management and Dispute Resolution
      • Industry Connections
      • Confidentiality and Trust

      If you need legal expertise for your tokenisation project, please do contact our legal team who can help you get your project launched.

      Client Feedbacks

      "What I like in MANIMAMA? If a millionaire comes to them they give the solution which fits him. That is why I came to them for tokenisation of luxury cars".

      "Manimama is not just a legal advisor. They are thrusted partners who support us during 3 year while tokenisation of real estate all over the world".

      "If you seek a law firm that combines deep knowledge with a dynamic approach, Manimama OU stands out as a prime choice."

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      How to obtain a cryptocurrency license in Malta

      Tax Summary: What law/s governs VASP activities? What activities are included in VASP services? VFA license types: Who is the VASP regulator? What is the procedure for registering a VASP for a local company? 1. Establishing a Company. If the company operates from outside Malta, it must have a branch in Malta with its registered…

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      Contact Us

      If our proposal is intriguing, we kindly request to complete the form provided below to learn more. By doing so, we guarantee access to a comprehensive commercial personalized offer, featuring up-to-date prices and detailed information.

      We look forward to the opportunity of collaborating and delivering exceptional solutions that meet and exceed expectations of any Client.

      The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.

      Security Token Issuance

      Connect with our experts

      By clicking the button, I confirm that I have read the privacy policy and consent to the collection and processing of my personal data in accordance with the GDPR rules.

      Security tokens, backed by real-world assets and subject to securities regulations, offer a transformative way to invest in and trade traditional financial instruments. By digitizing ownership of assets like stocks, bonds, or real estate, they introduce significant advantages. Increased liquidity allows for faster, more efficient transactions across global marketplaces, while fractional ownership democratizes access to high-value investments that were previously out of reach for many. Blockchain technology underpins these tokens, enabling programmable features within smart contracts. This means complex procedures like dividend payments, regulatory compliance, and even corporate actions could potentially be automated, leading to a more transparent and streamlined investment experience.

      Legal Opinion about Security Token Issuance

      Ganna Voievodina

      Manimama, CEO

      "Security tokens are changing how we invest. They offer more flexibility, better access, and increased security. In the modern world, security tokens aren't just a trend – they're a smart business move. Interested in exploring security tokens? Our legal team has the expertise to guide you through the process. Contact us today to learn more".

      Benefits of Security Token Issuance

      Real Estate

      Security tokens can revolutionize real estate investment by enabling fractional ownership, lowering barriers to entry, and facilitating global investment opportunities.

      Venture Capital

      Startups and entrepreneurs can utilize security tokens to raise capital by tokenizing equity in their companies, offering investors liquidity and access to previously inaccessible investment opportunities.

      Asset Tokenization

      Security tokens can represent ownership stakes in a wide range of assets, including fine art, collectibles, intellectual property, and more, unlocking liquidity in traditionally illiquid markets.

      Tokenized Funds

      Investment funds can leverage security tokens to offer investors diversified portfolios of assets, providing increased transparency, efficiency, and accessibility compared to traditional fund structures.

      Compliance and Governance

      Security tokens streamline compliance processes through programmable features such as automated dividend distributions, shareholder voting, and regulatory compliance enforcement.

      The Film and Entertainment Industry

      Security tokens can transform the way films, music, and other entertainment projects are funded. By tokenizing ownership or revenue rights, creators can access more direct financing from a global base of fans and investors.

      Our Services

      As a law firm specialising in serving tokenization projects, we are ready to offer a full range of legal services tailored to the unique needs of this rapidly evolving field, including:

      Regulatory compliance

      • Support in the complex regulatory landscape of the tokenization and blockchain industry
      • Ensuring compliance with local and international legislation, including securities regulations, AML and KYC requirements

      Choice of a jurisdiction

      • Researching and setting up the optimal corporate structure for tokenization projects with the right legal structure, appropriate taxes and investability

      Support of token issuance

      • Drafting all necessary documents for token issuance and eliminating risks of token recognition as a security (if applicable)

      Business structuring

      • Assessment of your structure, doing necessary research, further analysis and helping in empowering your plans

      Marketing and advertising

      • Preparing marketing plan for your business
      • Advertising plan adjustment
      • Website creation

      Use Cases of Security Token Issuance

      Security token issuance in Europe

      The new European Markets in Crypto-Assets (MiCA) Regulation has no specific regulation for Security tokens. It means that security token offering (STO) should be conducted in accordance with EU financial legislation. In Europe Security tokens are mostly classified as transferable securities and as a result are regulated by Markets in Financial Instruments Directive (MiFID II) and the EU Prospectus Regulation 2017/1129 (Prospectus Regulation). To STO, the issuer must prepare and publish a prospectus and obtain all necessary authorisations. A prospectus is a large legal document that includes all the information required for the issuance of a securitisation token.

      Despite such strict rules there are a large number of exceptions, for example:

      • the Prospectus Regulations do not apply to an offer of securities to the public with a total consideration in the European Union of less than EUR 1 000 000, which shall be calculated over a period of 12 months;
      • the obligation to publish a prospectus shall not apply to any of the following types of offers of securities to the public:
        • an offer of securities addressed solely to qualified investors;
        • an offer of securities addressed to fewer than 150 natural or legal persons (other than qualified investors) per each state in European Union;
        • an offer of securities whose denomination per unit amounts to at least EUR 100 000;
        • an offer of securities addressed to investors who acquire securities for a total consideration of at least EUR 100 000 per investor, for each separate offer;
        • other cases.

      In addition, the Prospectus Regulations also provide that Member State of EU may decide to exempt offers of securities to the public from the obligation to publish a prospectus provided that he total consideration of each such offer in the European Union is less than a monetary amount calculated over a period of 12 months which shall not exceed EUR 8 000 000. Thus, EU Member States can set their exemption limits from prospectus publication at national level.

      In the context of tokenization of assets we can pick up the Markets in Crypto-Assets (MiCA) Regulation and following type of the tokens:

      • Crypto-assets concerns “asset-referenced tokens”, which aim to stabilise their value by referencing another value or right, or combination thereof, including one or several official currencies. That second type covers all other crypto-assets, other than e-money tokens, whose value is backed by assets.
      • In order to issue this category of tokens, it is also necessary to go through the authorisation procedure, but here too there are no exceptions. Namely, an offer to the public can be made without authorization if:
        • over a period of 12 months, calculated at the end of each calendar day, the average outstanding value of the asset-referenced token issued by an issuer never exceeds EUR 5 000 000, or the equivalent amount in another official currency, and the issuer is not linked to a network of other exempt issuers; or
        • issuer never exceeds EUR 5 000 000, or the equivalent amount in another official currency, and the issuer is not linked to a network of other exempt issuers; or
        • the offer to the public of the asset-referenced token is addressed solely to qualified investors and the asset-referenced token can only be held by such qualified investors.

      Security token issuance in the United States of America

      Securities offered or sold in the U.S. must be registered with the SEC, unless the securities or the offering falls within an exemption from registration. Foreign companies may register their securities with the SEC. But a full SEC registration requires a significant amount of time and resources, making it generally infeasible for private issuers, including issuers of preferred share tokens. Luckily, the Securities Act provides several registration exemptions that permit issuers to offer and sell securities without undertaking this burden.

      Among the exemptions are the following:

      • Regulation A (T1 and T2);
      • Regulation D (506b);
      • Regulation D (506c);
      • Regulation S;
      • Regulation CF.

      Regulation A (T1 and T2)

      Regulation A is an exemption from registration for public offerings. Regulation A has two offering tiers: Tier 1 and Tier 2. In Tier 1, a company can raise a maximum of $20 million within a year. The company must submit offering statements to the SEC and get approval from state regulators where it intends to sell the securities. Although there are no ongoing reporting obligations, the company must provide a final report on the offering.

      Tier 2 allows companies to raise up to $75 million in a year. These companies must furnish audited financial statements and regularly file reports, including a final status report. Unlike Tier 1, Tier 2 issuers don't need to register with state securities regulators, but they still need to submit their offering to the SEC. Additionally, Tier 2 offerings come with extra requirements, such as restricting the amount non-accredited investors can invest in them.

      Regulation D (506b)

      Although the exemptions under Regulation D permit the sale of securities to individuals located in the United States, generally those individuals need to be “accredited investors.” Under Regulation D, if the sale is to be generally advertised to the public, the issuer has an obligation to verify that all purchasers are accredited by requiring them to provide documentation evidencing they qualify as such, which can be a costly and cumbersome process. In simple words, general partnerships can raise an unlimited amount of money from an unlimited number of accredited investors and as many as 35 non-accredited investors, as long as they do not publicly advertise or solicit investments for the fund. However it is not allowed to take on non-accredited investors without offering the same disclosure documents typically required under Regulation A of U.S. securities laws. To state that the firm is raising capital in a 506(b) offering, a firm simply checks the 506(b) option when it completes its Form D notice, the filing that confirms which exemption the fund is claiming. The SEC requires Form D to be filed within 15 days of the first close.

      Regulation D (506c)

      Rule 506(c) permits issuers to broadly solicit and generally advertise an offering, provided that:

      • all purchasers in the offering are accredited investors;
      • the issuer takes reasonable steps to verify purchasers’ accredited investor status; and
      • certain other conditions in Regulation D are satisfied.
      In short, accredited investors are eligible to invest in 506(c) offerings, but unlike with the 506(b) exemption, the fund’s Partnership or the firm must take “reasonable steps to verify” that the security purchasers are accredited or hire a third party to perform the verification. Firms can publicly market (advertise) their capital-raising offer to a larger investor base, beyond just one-on-one conversations and emails within their personal and professional networks.

      Regulation S

      Regulation S, which was adopted by the SEC in 1990, provides that offers and sales of securities that occur outside of the United States are exempt from the registration requirements of Section 5 of the Securities Act of 1933. The rule under (Regulation S) is referred to as Offshore Offers and Sales, and offers an exemption for qualifying foreign offerings made by U.S. companies. In simple words, Regulation S is a registration exemption which allows securities (or security tokens) only to be sold to non-US investors (accredited or unaccredited) exclusively outside of the United States.

      Simply saying, for token issuers who wish to sell their token to nonaccredited investors, Regulation S provides a safe harbor from registration so long as the offer and sale of securities occur solely outside the United States (whether the buyers are U.S. or foreign investors). Otherwise, the issuers will be subject to SEC regulation and enforcement.

      However, issuers can benefit from Regulation S by complying with two basic conditions:

      • the offer and sale of the securities must be made in an offshore transaction, meaning, the offer to buy must not have been made to a person in the United States, and either the buyer is, or is reasonably believed to be, physically located outside the United States, or the transaction is executed on an offshore market.
      • there can be no “directed selling efforts” in or into the United States of the securities offered under Regulation S.
      CF Regulation

      CF Regulation relates to Crowdfunding. For CF regulation applies following rules:

      • All transactions under Regulation Crowdfunding must exclusively occur online, facilitated by an intermediary registered with the SEC, which could be either a broker-dealer or a funding portal. Companies are permitted to raise up to a maximum aggregate amount of $5 million through crowdfunding offerings within a span of 12 months.
      • There are limits placed on the amount individual non-accredited investors can contribute across various crowdfunding opportunities within a one-year period. Full disclosure of information is mandated in filings with the Commission, as well as to investors and the intermediary overseeing the offering.
        • In addition, securities procured through crowdfunding transactions generally have a lock-up period of one year, during which they cannot be resold.

      Why Work With Manimama?

      • Expertise in Blockchain and Digital Asset
      • Experience with Tokenization Projects
      • Comprehensive Legal Support
      • Tailored Legal Strategies
      • Regulatory Compliance
      • Risk Management and Dispute Resolution
      • Industry Connections
      • Confidentiality and Trust

      If you need legal expertise for your tokenisation project, please do contact our legal team who can help you get your project launched.

      Frequently Asked Questions

      • What exactly is a security token?
        A security token is a digital representation of ownership in a real-world asset, such as a share of company stock, a bond, or even real estate. They are created and traded on blockchain platforms.
      • How do security tokens differ from traditional securities?
        • Increased Efficiency: Blockchain technology streamlines transactions, potentially lowering costs and settlement times.
        • Fractional Ownership: Security tokens can be divided into smaller units, opening investment opportunities to those who might be priced out of buying a whole share, for example.
        • Global Access: Security tokens can potentially be traded on global exchanges, broadening investor reach
        • Programmable Features: Security tokens can have rules and features built directly into them (e.g., automated dividend payments or compliance restrictions).
      • What are the benefits of issuing security tokens?
        • Greater Liquidity: Tokens can be traded potentially 24/7 on global exchanges
        • Cost Reduction - Blockchain technology may reduce intermediary costs.
        • New Investor Base - Access a broader pool of investors due to fractionalization and global distribution possibilities.
        • Regulatory Clarity: STOs often fall under existing securities regulations, providing a clearer framework for issuers.
      • What is a Security Token Offering (STO)?

        A Security Token Offering (STO) is the process of creating and selling security tokens to the public. Think of it as the blockchain-based equivalent of an Initial Public Offering (IPO).

      • What regulations apply to security tokens?

        Security tokens are treated as traditional securities in most jurisdictions. Issuers will need to comply with regulations set by bodies like the Securities and Exchange Commission (SEC) in the US or local equivalents in other countries.

      • What are some of the use cases for security tokens?
        • Company Shares: Startups and larger companies can tokenize their shares to raise capital.
        • Real Estate: Property can be divided into tokens representing fractional ownership.
        • Art & Collectibles: Unique pieces of art or collectibles can be tokenized to allow shared ownership.
        • Debt: Bonds and other debt instruments can be issued as security tokens.

      Client Feedbacks

      "What I like in MANIMAMA? If a millionaire comes to them they give the solution which fits him. That is why I came to them for tokenisation of luxury cars".

      "Manimama is not just a legal advisor. They are thrusted partners who support us during 3 year while tokenisation of real estate all over the world".

      "If you seek a law firm that combines deep knowledge with a dynamic approach, Manimama OU stands out as a prime choice."

      Our Latest Legal Researches

      How to obtain a cryptocurrency license in the Netherlands

      Tax Summary: What law/s governs VASP activities? What activities are included in VASP services? The following crypto service providers are regulated in the Netherlands, according to the Money Laundering and Terrorist Financing Prevention Act: At the moment the entities who offer crypto-to-crypto exchanges are still not regulated. Who is the VASP regulator? What is the…

      April / 18 / 2024
      Read more

      How to obtain a cryptocurrency license in Malta

      Tax Summary: What law/s governs VASP activities? What activities are included in VASP services? VFA license types: Who is the VASP regulator? What is the procedure for registering a VASP for a local company? 1. Establishing a Company. If the company operates from outside Malta, it must have a branch in Malta with its registered…

      April / 16 / 2024
      Read more

      How to obtain a cryptocurrency license in Luxembourg

      Tax Summary: What law/s governs VASP activities? What activities are included in VASP services? Who is the VASP regulator? What is the procedure for registering a VASP for a local company? Entities established in Luxembourg or providing services in Luxembourg cannot offer virtual asset services without registration with CSSF, as provided for in Article 7-1(1)…

      April / 11 / 2024
      Read more

      Contact Us

      If our proposal is intriguing, we kindly request to complete the form provided below to learn more. By doing so, we guarantee access to a comprehensive commercial personalized offer, featuring up-to-date prices and detailed information.

      We look forward to the opportunity of collaborating and delivering exceptional solutions that meet and exceed expectations of any Client.

      The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.

      Luxury Units Tokenization

      Connect with our experts

      By clicking the button, I confirm that I have read the privacy policy and consent to the collection and processing of my personal data in accordance with the GDPR rules.

      Luxury units tokenization is an innovative approach that involves converting high-value physical assets such as jewelry, fine wine or watches into digital tokens on blockchain platforms. This process enables fractional ownership, letting investors own a fraction of these assets without the need for large capital investments.

      Tokenization opens up investment opportunities in the luxury market to a wider range of individuals, democratizing access to exclusive assets. It also increases liquidity by making it easier to buy, sell and trade these tokenised assets on digital asset exchanges. All in all, the tokenisation of luxury goods represents a significant evolution in asset ownership and investment strategies in the digital age.

      Key Numbers about Luxury Units Tokenization

      $2.3 trillion

      estimated size of the market for luxury goods suitable for tokenization

      24/7

      tokenized luxury asset markets can operate 24/7 globally

      $5-$15 billion

      estimated market size for STOs in the luxury sector by 2025

      50%

      the potential increase in liquidity for luxury assets

      5-10 years

      timeline in which experts believe tokenization of luxury assets could gain significant traction

      15-30%

      the potential cost reduction in the lifecycle of luxury assets due to the efficiencies introduced through tokenization

      Legal Opinion about Luxury Units Tokenization

      Ganna Voievodina

      Manimama, CEO

      "What I can say is that tokenization of luxury goods offers lucrative opportunities for investors. This allows them to diversify their portfolios and potentially earn a significant return on investment as the value of tokenized luxury goods increases over time. Get in touch with the Manimama team, experts in luxury tokenization, to turn your investment dreams into reality on the global blockchain arena".

      Challenges of Traditional Luxuries Ownership

      Significant Capital Demands:

      • Exclusivity: luxuries are designed to be exceptional and are often premium priced. This exclusivity applies to ownership, where only people with considerable financial resources can afford to purchase these items.
      • Concentration of Wealth: concentration of ownership by a small group of high-income individuals can lead to wealth inequality and limit opportunities for greater participation in luxury markets.

      Legal restrictions:

      • AML and KYC Regulations: fulfilment of AML and KYC regulations is critical when dealing with high-value luxury goods to prevent money laundering, fraud and illegal activity. Rigorous due diligence and documentation may be required to establish the legitimacy of buyers and sellers.
      • Regulations on Import and Export: luxuries are often subject to strict import and export regulations, including customs duties, taxes and restrictions on certain items based on their cultural or historical significance. These regulations can affect the value and appropriateness of purchasing or selling luxury goods across borders.
      • Taxation: depending on the jurisdiction, taxation of luxury goods can vary, including sales taxes, capital gains taxes, wealth taxes and inheritance taxes. It is important to understand and comply with tax laws to minimize tax liabilities and ensure compliance.

      Problems with Liquidity:

      • Special Buyers: often luxury buyers are collectors or enthusiasts, further narrowing the pool of potential buyers and slowing down the sales process.
      • Instability of Prices: the illiquidity of luxury goods can lead to price fluctuations where sudden changes in market demand or economic conditions can affect the value of the good and its ease of sale.
      • Deal Costs: luxury goods sales can entail high transaction costs such as brokerage fees, taxes and assessment costs, which reduce the net proceeds received by the seller.

      Maintenance and Care:

      • Dedicated Facilities: many luxury goods, such as fine wines, require specialized storage facilities with a controlled environment to preserve their condition and value.
      • Maintenance and Restoration: in order to maintain the quality and aesthetics of luxury goods, routine maintenance and periodic restoration work may be required, increasing the total cost of ownership.
      • Climate Control: certain luxury goods can be sensitive to fluctuations in temperature, humidity or light, so special climate control is required for storage.

      Geographical Constraints:

      • Cultural Preferences: depending on cultural and regional factors, consumer preferences for luxury goods can vary, which affects demand patterns and market dynamics. Because of this diversity, it can be difficult for sellers to appeal to a global audience.
      • Logistics Challenges: the process of shipping and logistics of luxurious goods can be complicated, especially when dealing with large or sensitive goods that require special handling, packaging and transport. Geographical distances can also influence delivery times and costs.
      • Currency Exchange: international trade transactions in luxury goods may be subject to currency risks and fluctuations, which affect the general value and profitability of cross-border sales or purchases.

      Expenses for Security and Insurance:

      • Security Systems: the installation and maintenance of security systems such as surveillance cameras, alarms, access control and security personnel can be expensive but essential to protecting luxury assets.
      • Specialized Policies: luxuries may require special insurance policies developed for their unique characteristics, such as jewelry insurance, which can further drive up insurance costs.
      • Risk Minimisation: owners are required to continually assess and mitigate risks to their high-end assets, which may include regular security audits, risk assessments and adherence to security standards and protocols.

      Benefits of the Luxury Units Tokenization

      Lower Entry Barrier

      Through fractional ownership, tokenization lowers the barrier to entry for investors, enabling more people to invest in luxuries without having to purchase it.

      Liquidity Boost

      Tokenized assets are much more liquid than traditional property as they can be traded on digital asset exchanges, giving investors increased flexibility to buy, sell and exchange ownership stakes.

      Transparency and Authenticity

      Blockchain technology makes it possible to monitor and verify the history and genuineness of each piece of luxuries, which reduces the potential for fraud and increases customer confidence.

      Diversified Portfolios

      Investors can broaden their portfolios to include a tokenized luxury assets, which often retain their value regardless of traditional financial markets.

      Safe and Efficient Transactions

      Blockchain offers secure, fast and economically efficient transactions, reducing the need for intermediaries and lowering the cost of transactions.

      Global Accessibility

      Tokenization eliminates geographical barriers, allowing investors from around the world to gain access to and invest in luxury assets, thereby expanding market reach and opportunities.

      Our Services

      As a law firm specialising in serving tokenization projects, we are ready to offer a full range of legal services tailored to the unique needs of this rapidly evolving field, including:

      Regulatory compliance

      • Support in the complex regulatory landscape of the tokenization and blockchain industry
      • Ensuring compliance with local and international legislation, including securities regulations, AML and KYC requirements

      Choice of a jurisdiction

      • Researching and setting up the optimal corporate structure for tokenization projects with the right legal structure, appropriate taxes and investability

      Support of token issuance

      • Drafting all necessary documents for token issuance and eliminating risks of token recognition as a security (if applicable)

      Business structuring

      • Assessment of your structure, doing necessary research, further analysis and helping in empowering your plans

      Marketing and advertising

      • Preparing marketing plan for your business
      • Advertising plan adjustment
      • Website creation

      Use Cases for Tokenized Luxuries

      European Model

      The tokenisation business models that we are building cannot reach their full potential if they operate within a single country. Thus, we would like to introduce you to the "Switzerland-Lithuania-Thailand model" that we have created.

      Key points:

      • Switzerland currently does not have a special license to sell certain types of jewelry, and only AML rules are applicable. Hence, in our model Switzerland is used as an independent trading platform for jewellery or precious metals, i.e. a platform where public offers to buy and sell jewelry are placed.
      • For the purpose of cryptoprocessing, every European VASP can be used. The reason for using a separate cryptocurrency processing company is to escape the complex regulation in Switzerland and use a more straightforward jurisdiction to set up a VASP.
      • Thailand used to be a physical shop for a jewelry. That is why we were required to keep the country in the model. To confirm the storage agreement, the Thailand company draws up and delivers an NFT to the customer.
      The core of the model lies in the following:
      • Establishment of companies in Switzerland and Thailand, VASP in Europe.
      • Switzerland as Marketplace Operator: developing technical documentation for Swiss marketplace (e.g. website legal documents, NFT Marketplace Rules, all types of legal agreement for ensuring necessary platform`s functionality, KYC questionnaire etc.).
      • EU VASP as Crypto Processing Operator: legal support includes at least application for VASP, AML Policies, Agreements with Swiss and Thai companies.
      • Thailand store as Seller of jewelry.

      Dubai Model

      We also developed a "Dubai-Dubai-Thailand model", which is oriented towards the UAE market.

      Key points:

      • There were two companies in Dubai - the first was used as a trading platform and was required to obtain a license to trade in precious metals, and the second one was a company with a VARA Exchange Services license and was used to provide cryptocurrency processing services.
      • As a local regulator, VARA recognises two categories of utility tokens, which are classified into Category 1 (financial), and Category 2 (non-financial). There is no explicit regulation of NFTs. However, NFTs can be allocated to Category 2 of tokens when one of the additional necessary conditions is met (e.g. one transaction exceeds AED 40,000 ($10,890), is offered to more than 150 persons, etc.).
      The core of the model lies in the following:
      • Establishment of 2 companies in Dubai and 1 in Thailand.
      • Dubai as Marketplace Operator: developing technical documentation for Dubai marketplace (e.g. website legal documents, NFT Marketplace Rules, all types of legal agreement for ensuring necessary platform`s functionality, KYC questionnaire etc.).
      • Dubai company with VARA license as Crypto Processing Operator: legal support includes at least application for VASP, AML Policies, entering into Agreements with partner companies.
      • Thailand store - Seller of jewelry.

      Thai Model

      Our other business model for NFT-tokenization of a real-world object has been developed as the "Thai model".

      Key points:

      • Thai Emergency Decree on Digital Asset Businesses, B.E. 2561 (2018) offers a wide distinction of digital assets, which means cryptocurrency and digital token. In turn, digital token can be Utility or Investment one. Regulator - Securities and Exchange Commission (SEC).
      • After SEC Public Hearing, it was proposed to create 2 Groups of Utility tokens in the beginning of 2023. If any token is issued as a digital certificate or representation of rights, such as documents confirming ownership rights, then the token is classified as Group 1 Utility tokens, which covers our case.
      • Group 1 Utility tokens are exempt from offering requirements, meaning that the issuer can issue Utility Tokens Group 1 without obtaining prior approval from the SEC, and can be NFT.
      • In result, for our client's business, it fitted into Group 1 Utility token category, as it aligned with the key rule of not granting additional rights to the owner beyond recording real-world object history.
      The core of the model lies in the following:
      • Establishment of a company in Thailand.
      • Creation of technical documentation, preparation of token structure.
      • Selecting an ICO portal that is licensed by the SEC to offer digital tokens.
      • Token offering on the ICO portal resource.

      Why Work With Manimama?

      • Expertise in Blockchain and Digital Asset
      • Experience with Tokenization Projects
      • Comprehensive Legal Support
      • Tailored Legal Strategies
      • Regulatory Compliance
      • Risk Management and Dispute Resolution
      • Industry Connections
      • Confidentiality and Trust

      If you need legal expertise for your tokenisation project, please do contact our legal team who can help you get your project launched.

      Frequently Asked Questions

      • What is luxury units tokenization?
        Luxury units tokenization is the process of turning physical luxury goods into digital tokens on the blockchain. These tokens constitute a digital ownership or right to the luxury item.
      • What are the key benefits of luxury units tokenization?
        Benefits include easier access to luxury investments, enhanced asset liquidity, lower management and transaction costs, and the ability to fractionalize ownership.
      • What is the main purpose of luxury units tokenization?
        The core objective of luxury units tokenization is to make access to investment in these goods more extensive and easy by giving investors the ability to own a piece of luxury assets without having to physically possess the item.
      • How is the tokenized luxury units secured?
        Security is ensured through blockchain technology, which provides non-transparent transactions, anti-counterfeiting protection and digital authentication of assets.
      • What types of luxury units can be tokenized?
        Almost any luxury asset can be tokenized, including jewelry, fine wines, expensive watches, collectibles, etc.
      • How can I get access to investing in tokenized luxury assets?
        You can access investing generally through specialized tokenized asset platforms that offer a variety of luxury assets for investment.

      Client Feedbacks

      "I had a wonderful experience working with Manimama OU. Their legal team was extremely knowledgeable and easily helped me resolve a difficult legal issue."

      "I am very pleased with the services provided by Manimama OU. They were prompt, thorough and attentive to my needs. I will not hesitate to utilize their services in the future."

      "Working with Manimama OU has been a pleasant experience for me. I am grateful for their dedication and would recommend them to anyone looking for first class legal representation."

      Our Latest Legal Researches

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      Contact Us

      If our proposal is intriguing, we kindly request to complete the form provided below to learn more. By doing so, we guarantee access to a comprehensive commercial personalized offer, featuring up-to-date prices and detailed information.

      We look forward to the opportunity of collaborating and delivering exceptional solutions that meet and exceed expectations of any Client.

      The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.

      Tokenization of Vehicles

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      Step into the forefront of innovation with the concept of tokenization of vehicles where blockchain technology changes the landscape of vehicle ownership and security. This revolutionary method meticulously digitizes the identity and history of each vehicle, facilitating seamless transactions while bolstering defenses against fraudulent activities.

      Dive into the future with us to know more about the impact of digital tokens on the automotive industry, propelling it towards an era characterized by transparency and efficiency. Experience firsthand how tokenization is redefining the way vehicles are bought, sold, and managed.

      Key Numbers about Tokenization of Vehicles

      $9.3 billion

      the estimated value of the global automotive tokenization market by 2027

      24/7

      market access

      30%

      the projected increase in efficiency for automotive supply chains by 2030 through the implementation of blockchain-based tokenization systems

      20%

      the reduction in operational costs for automotive manufacturers through the implementation of blockchain-based tokenization systems

      $150 billion

      the estimated annual savings in fraud-related costs for the automotive industry by 2025, attributed to the implementation of blockchain-based tokenization

      15%

      the projected increase in the resale value of tokenized cars compared to non-tokenized cars due to enhanced transparency, traceability, and trust in the vehicle's history, maintenance, and ownership records

      Legal Opinion about Tokenization of Vehicles

      Ganna Voievodina

      Manimama, CEO

      "I believe that tokenization of vehicles has the potential to revolutionize the automotive industry. Fractional ownership through tokenization could unlock new investment opportunities and democratize access to high-value vehicles. Additionally, the efficiency and transparency of blockchain transactions could streamline vehicle sales and management. So if you are interested in tokenization of vehicles, then please feel free to contact Manimama for support ".

      Challenges in Traditional Automotive Markets

      Initial and Ongoing Costs:

      • Purchase Price: traditional ownership entails a substantial upfront investment, including the purchase price of the vehicle, which can be a significant financial burden for many consumers.
      • Ongoing Expenses: beyond the initial purchase, owners face ongoing costs such as maintenance, insurance, fuel, and registration fees, which can add up over the vehicle's lifetime.

      Environmental Impact:

      • Emissions: each vehicle contributes to air pollution and greenhouse gas emissions, exacerbating environmental issues such as climate change and air quality deterioration.
      • Resource Consumption: the manufacturing process for vehicles requires significant amounts of energy and resources, further contributing to environmental degradation and resource depletion.

      Maintenance and Management:

      • Responsibility for Maintenance: owners are responsible for all aspects of vehicle maintenance, including routine servicing, repairs, and upkeep. This can be both costly and time-consuming, especially for older vehicles or those with complex mechanical systems.
      • Time and Effort: managing maintenance schedules, arranging repairs, and dealing with unexpected breakdowns can consume valuable time and effort for vehicle owners, impacting their daily lives and productivity.

      Accessibility and Inclusion:

      • Financial Barrier: traditional car ownership can be exclusionary for individuals or families with limited financial means, as it requires significant upfront costs and ongoing expenses.
      • Geographical Limitations: in areas with limited public transportation infrastructure, the lack of affordable and accessible transportation options can further exacerbate disparities in mobility and economic opportunity.

      Market Liquidity and Flexibility:

      • Selling Challenges: selling a vehicle can be a complex and time-consuming process, involving advertising, negotiating, and transferring ownership paperwork. Additionally, market value uncertainties and fluctuations can impact the resale value of the vehicle, leading to potential financial losses for sellers.
      • Low Asset Liquidity: vehicles are generally considered illiquid assets, meaning they cannot be easily converted into cash without incurring significant transaction costs or delays. This lack of liquidity can limit individuals' flexibility in managing their assets and financial resources.

      Technological Adaptation and Data Privacy:

      • Rapid Technological Advancements: owners may face challenges in keeping up with rapidly evolving automotive technologies like advanced driver-assistance systems (ADAS). Adapting to these technologies may require additional training, expertise, and financial investment.
      • Data Privacy Concerns: modern vehicles collect and transmit vast amounts of data, including location information, vehicle diagnostics. Owners may have concerns about the privacy and security of their personal data, especially in light of potential data breaches or unauthorized access by third parties.

      Benefits of Tokenization of Vehicles

      Around-the-Clock Trading

      Imagine a world where you can trade shares in vehicles just as easily as stocks, at any time of day, without the need for traditional brokerages. Tokenization makes this possible, creating a vibrant, 24/7 market that offers liquidity and flexibility.

      Simplified Transactions

      Tokenization can streamline the buying and selling process by automating and securing transactions with smart contracts. This can reduce the need for middlemen, lowering transaction costs and making processes more efficient.

      Increased Capital Influx

      As vehicles become fractionalized and more accessible, a greater number of investors can participate, leading to a larger capital influx into the market.

      Accessible Partial Ownership

      Tokenization breaks down financial barriers, allowing for the fractional ownership of traditionally expensive assets like classic vehicles. This means that investors can acquire fractions of expensive vintage cars, making it easier for more people to invest in these assets.

      Ease of Liquidation

      Tokenized assets can be liquidated at any desired time without the usual hurdles such as legal fees, paperwork, and costly working hours, making the process more efficient.

      Tax Advantages

      In certain jurisdictions, like Liechtenstein, the tokenization of assets offers compelling tax advantages, making it not only a smart investment in terms of asset appreciation but also a savvy tax strategy.

      Our Services

      As a law firm specialising in serving tokenization projects, we are ready to offer a full range of legal services tailored to the unique needs of this rapidly evolving field, including:

      Regulatory compliance

      • Support in the complex regulatory landscape of the tokenization and blockchain industry
      • Ensuring compliance with local and international legislation, including securities regulations, AML and KYC requirements

      Choice of a jurisdiction

      • Researching and setting up the optimal corporate structure for tokenization projects with the right legal structure, appropriate taxes and investability

      Support of token issuance

      • Drafting all necessary documents for token issuance and eliminating risks of token recognition as a security (if applicable)

      Business structuring

      • Assessment of your structure, doing necessary research, further analysis and helping in empowering your plans

      Marketing and advertising

      • Preparing marketing plan for your business
      • Advertising plan adjustment
      • Website creation

      Use Cases for Automotive Tokenization

      Tokenization of Vehicles in Germany

      In an innovative leap forward, our firm had the privilege of working on a model for the tokenization of vehicles in Germany. This was made possible through the Law on Electronic Securities (Gesetz zur Einführung elektronischer Wertpapiere), a progressive legislation that embraces the use of Distributed Ledger Technology (DLT) for the issuance of bearer bonds.

      The Law on Electronic Securities marks a significant stride in the legal domain, establishing a robust legal framework that facilitates the trading rights via electronic securities registries. Furthermore, it introduces a novel category of license specifically tailored for managing registers of cryptocurrency securities, thereby laying the groundwork for a new era of financial transactions.

      In Germany, the tokenization model can be implemented through the issuance of regular company shares (preferably GmbH, limited partnership, or cooperative). Tokenized shares are entered into an electronic cryptocurrency registry, after which they acquire the status of a registered security, the owners of which can freely utilize the full potential of the token. When implementing the business model according to German legislation, token registration is mandatory.

      The essence of the model is as follows:
      • It is necessary to establish a German company.
      • The company forms its share capital through assets (such as a car).
      • The company tokenizes its shares by registering them as electronic securities.
      • The electronic securities are distributed among investors.
      • Investors make decisions regarding the car and receive income depending on the number of electronic securities (tokens) they hold.

      Tokenization of Vehicles in Liechtenstein

      Another well-worked model for such a vehicle can be realized in Liechtenstein. This model is based on the Token and Trusted Technology Service Providers Act (TVTG). This law applies to all providers of trusted technology services, who generate or issue tokens in Liechtenstein, or when the parties involved in token transactions directly envisage its application.

      According to the TVTG, trusted technologies are technologies that ensure the integrity of tokens, clear assignment of tokens to a trusted technology identifier, and token transfer. Tokens, in turn, are defined as information within the trusted technology system that may represent claims or rights, ownership rights, or other absolute and relative rights and may be assigned one or more trusted technology identifiers.

      In Liechtenstein, authorization as a Trusted Technology Service Provider is mandatory for token issuance.

      The essence of the model is as follows:
      • It is necessary to establish a company in Liechtenstein.
      • The company must undergo registration and authorization as a Trustee Technologies Service Provider.
      • The company owns vehicles and issues a certain number of tokens that confirm ownership rights to a specific vehicle.
      • Investors acquire tokens and make decisions regarding the vehicles and receive income based on the number of tokens they own.

      Why Work With Manimama?

      • Expertise in Blockchain and Digital Asset
      • Experience with Tokenization Projects
      • Comprehensive Legal Support
      • Tailored Legal Strategies
      • Regulatory Compliance
      • Risk Management and Dispute Resolution
      • Industry Connections
      • Confidentiality and Trust

      If you need legal expertise for your tokenisation project, please do contact our legal team who can help you get your project launched.

      Frequently Asked Questions

      • What is tokenization of vehicles?
        Tokenization of vehicles is a process in which a vehicle is digitized by creating and issuing tokens on the blockchain.
      • What are the benefits of tokenization of vehicles?
        The benefits of tokenization of vehicles are as follows: around-the-clock trading, simplified transactions, increased capital influx, accessible partial ownership, tax advantages.
      • What is partial ownership?
        Tokenization allows many people to own part of a vehicle. Thus, you can collectively own a BMW with other people without needing to pay full price for it.
      • Where can you review your rights as an investor in vehicle tokens?
        Your rights are recorded in a smart contract.
      • In which countries does legislation regulate the tokenization of vehicles?
        Tokenization of vehicles is possible in countries such as Germany, Lichteinstein.
      • Why is the tokenization of vehicles a good thing?
        In the case of tokenization of vehicles, the token holds all the information in one place: documentation, certificates, images, maintenance records, and so on, and provides indisputable proof that can be used when you sell your vehicle.

      Client Feedbacks

      "What I like in MANIMAMA? If a millionaire comes to them they give the solution which fits him. That is why I came to them for tokenisation of luxury cars".

      "Manimama OU's commitment to excellence and innovation in the legal field has made my professional journey incredibly rewarding."

      "If you seek a law firm that combines deep knowledge with a dynamic approach, Manimama OU stands out as a prime choice."

      Our Latest Legal Researches

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      April / 11 / 2024
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      Contact Us

      If our proposal is intriguing, we kindly request to complete the form provided below to learn more. By doing so, we guarantee access to a comprehensive commercial personalized offer, featuring up-to-date prices and detailed information.

      We look forward to the opportunity of collaborating and delivering exceptional solutions that meet and exceed expectations of any Client.

      The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.

      Real Estate Tokenization

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      Real estate tokenization is revolutionizing the traditionally illiquid world of real estate investing. The process involves converting ownership rights in a property into digital tokens on a blockchain. These tokens represent fractional shares of the property, allowing investors to purchase smaller portions of high-value assets. This opens up real estate investing to a wider pool of participants, increasing accessibility and potentially boosting liquidity.

      Let's find out what is real estate tokenization in details and how to get all benefits from this process

      Key Numbers about Real Estate Tokenization

      $200 Million

      value of tokenized real estate market

      over 10%

      average ROI of tokenized real estate

      less than 1$

      possible amount of initial investment using tokenization benefits

      15 minutes

      average period between registration on the platform and first investment

      no

      strict legal procedures on the client's side

      641%

      growth of tokenized treasury products in in 2023

      Legal Opinion about Real Estate Tokenization

      Ganna Voievodina

      Manimama, CEO

      "The world of real estate investment is changing rapidly, and tokenization is at the forefront of that transformation. This innovative approach presents complex legal and regulatory considerations. As a lawyer with specialized knowledge in real estate tokenization, I'm here to guide you through these complexities, ensuring a seamless and secure investment experience. Don't be left behind – let's explore the opportunities that tokenization offers for your portfolio".

      Challenges in Traditional Real Estate Investment

      High Barriers to Entry:

      • Substantial Capital: real estate often requires a large down payment (sometimes 20% or more of the property's value). Additional costs like closing fees, legal expenses, taxes, and insurance quickly add up. This can create a significant obstacle for those without abundant financial resources.
      • Limited Access to Financing: even when using financing, securing a mortgage for an investment property may be harder to obtain or come with less favorable terms compared to mortgages for owner-occupied homes. This further restricts access to the real estate market.
      • The Hidden Hurdles: beyond the obvious financial costs, less talked about barriers often play a role. Acquiring necessary knowledge about valuation, market analysis, and legal processes takes both time and effort. These less tangible investments can be as prohibitive as the upfront financial ones for those who lack the knowledge or resources to navigate them.

      Lack of Diversification:

      • Single Asset Risk: traditional real estate investment often focuses on one property in a particular area. This concentrates your risk - if something negatively impacts the property's value or the local market, your entire investment could be affected.
      • Challenges Spreading Investment: to mitigate this risk with diversification, you'd ideally want to buy multiple properties across various locations. This demands a substantial increase in capital and management effort, out of reach for many investors.

      Market Volatility:

      • External Forces at Play: real estate, unlike some other investments, is highly sensitive to external events. A downturn in the broader economy, a sudden spike in interest rates, or even a shift in the local job market can negatively impact your property's value and the rental income it generates. This susceptibility to outside forces makes it an inherently less predictable investment.
      • Emotional Toll: beyond the time factor, dealing with tenant disputes, chasing unpaid rent, or responding to emergency maintenance issues can introduce emotional strain and stress. For investors without a thick skin or a dispassionate approach, this may significantly offset the financial gains of property ownership.
      • The Illusion of Stability: while long-term trends have historically shown real estate appreciation, it's vital to remember that past performance doesn't guarantee future outcomes. It's essential to be aware of the cyclical nature of real estate markets and the potential for periods where values stagnate or even decline.

      Illiquidity:

      • Complex Sales Process: selling real estate is a lengthy process. From finding a buyer to negotiating the price, dealing with inspections, appraisals, and paperwork, it can take months to convert the property into cash.
      • Difficulty Accessing Funds: this illiquidity makes it challenging to access your investment quickly in case of emergencies or sudden needs. You can't easily tap into a property's value unless it has been sold.
      • The Problem of Forced Decisions: illiquidity forces investors into "all-or-nothing" situations. Needing to sell property quickly, even in a less-than-ideal market, puts you in a reactive position. This weakens your negotiation power and can lead to accepting lower prices just to free up your trapped capital.

      Management Overhead:

      • Hidden Time Investment: while the appeal of rental income might seem passive, the reality of landlording often involves a significant investment of your time. Advertising vacancies, carefully screening potential tenants, coordinating repairs, and handling legal compliance isn't always quick or easy. This 'hidden' time commitment can chip away at your overall profits and personal freedom.
      • Emotional Toll: beyond the time factor, dealing with tenant disputes, chasing unpaid rent, or responding to emergency maintenance issues can introduce emotional strain and stress. For investors without a thick skin or a dispassionate approach, this may significantly offset the financial gains of property ownership.
      • Delegating at a Cost: property management companies can alleviate much of this burden, but they don't work for free. Choosing to outsource the management means factoring their fees into your projected returns, which can reduce overall profitability.

      Geographic Limitations:

      • Missing the Bigger Picture: focusing exclusively on local properties can blind you to more lucrative markets elsewhere. Areas with strong job growth, favorable tax environments, or emerging infrastructure projects may offer better ROI or lower barriers to entry.
      • Difficulty Expanding: even with substantial capital, geographically limited investing can hinder your ability to rapidly grow your portfolio. Concentrating in one area makes you more exposed to regional economic downturns and limits your capacity to take advantage of multiple growth markets at the same time.

      Benefits of Real Estate Tokenization

      Lowering Barriers to Entry

      By representing property ownership with digital tokens, tokenization allows for fractional ownership. Instead of purchasing an entire property, investors can buy tokens representing a smaller portion, significantly reducing the upfront capital needed to participate.

      Increasing Liquidity

      Tokens can be traded on secondary markets or specialized exchanges. This provides greater liquidity compared to traditional real estate, where finding a buyer can take months. Investors can exit their positions more quickly if desired, providing financial flexibility.

      Enabling Diversification

      Tokenization makes it easier for investors to build a diversified real estate portfolio. By purchasing tokens representing different properties, investors spread their risk across various assets, locations, and market types.

      Reducing Management Overhead

      Many tokenized real estate platforms handle property management responsibilities, including tenant selection, maintenance, and rent collection. This relieves investors of direct landlord duties, especially for those without the time or expertise for property management.

      Addressing Market Volatility

      While real estate tokenization doesn't eliminate market volatility entirely, it can mitigate risk by enabling diversification. Additionally, the increased liquidity could reduce some of the dramatic price swings associated with illiquid real estate assets.

      Expanding Geographic Reach

      Tokenization removes geographic barriers, allowing investors worldwide to participate in promising real estate projects. This opens up access to a much wider range of real estate opportunities and potential investment returns.

      Our Services

      As a law firm specialising in serving tokenization projects, we are ready to offer a full range of legal services tailored to the unique needs of this rapidly evolving field, including:

      Regulatory compliance

      • Support in the complex regulatory landscape of the tokenization and blockchain industry
      • Ensuring compliance with local and international legislation, including securities regulations, AML and KYC requirements

      Choice of a jurisdiction

      • Researching and setting up the optimal corporate structure for tokenization projects with the right legal structure, appropriate taxes and investability

      Support of token issuance

      • Drafting all necessary documents for token issuance and eliminating risks of token recognition as a security (if applicable)

      Business structuring

      • Assessment of your structure, doing necessary research, further analysis and helping in empowering your plans

      Marketing and advertising

      • Preparing marketing plan for your business
      • Advertising plan adjustment
      • Website creation

      Real Estate Tokenization Use Cases

      Real Estate Tokenization in Dubai

      One of the projects was realization of real estate tokenization in Dubai. At the time, Real Estate Regulatory Authority forbid more than four investors in one real estate object. We offered our client perfect solution - every object will be owned and managed by Special Purpose Vehicle (SPV). SPV is a legal entity which owns real estate. So every token represents your shares in such a SPV. Then SPV hires special manager to make sure that property managed in the right way to maximize revenues from the property. Using modern and convenient platform every person can be shareholder and make money by receiving dividends.

      During the investment period, in the event of a sharp change in market conditions, the manager raises the issue of selling the property. The average investment period is 3-5 years, after which, at the end of the investment period, the property will be sold and the investor's share of the proceeds from the sale (after deducting all relevant transaction costs) will be distributed among all investors in accordance with their ownership of the SPV (number of shares). At this point, the user's investment is considered redeemed (at profit or loss) and the SPV will subsequently be liquidated.

      The essence of the Dubai model is as follows:
      • It is necessary to establish a Dubai company.
      • Company must have a license from Dubai Financial Services Authority (DFSA).
      • No person can hold more than 33% of one real estate object.
      • Users shall surpass strict AML/CFT procedures.
      • Investors make decisions regarding the property and receive income depending on the number of tokens they hold.

      Real Estate Tokenization in USA

      Manimama stands as a long-term and thrusted legal advisor of the fabulous property tokenization platform Binaryx. This is a marketplace where users can buy and sell their property tokens. Tokenization is a process of transferring ownership of real estate to blockchain. Each user can view and buy the objects that are already available for sale and/or put up his own fraction of tokenized property for sale. Data on the Marketplace comes from the blockchain and a system of oracles, providing users with all the necessary and up-to-date information, including ratings, historical performance, and expected returns of each tokenized property.

      Any holder of property tokens can easily sell his tokens to other users on the Marketplace. Tokens are member units of a specific legal entity formed as a decentralized autonomous organization (DAO). This is a form of organization in which coordination is carried out without centralized control but using some automated algorithms (such as those implemented in smart contracts). Token holders will become the owners of the property owned by their DAO LLC, which has the property's title deed registered to it. DAO LLC has a separate property ownership and legal structure which protects members and holders of tokens.

      Such business may operate in accordance with the SF0038 law, adopted in the state of Wyoming, USA, in 2021. It allows for the creation of companies with multiple co-owners from around the world, with ownership being formalized in a few clicks. For each property, a new legal entity (LLC) in the state of Wyoming, USA may be incorporated. By investing in the property, investors become co-owners of this legal entity.

      When the property collects the full amount of investment, it gets transferred to the ownership of the registered legal entity. This way, investors become co-owners of this property. The ownership rights are recorded in a public and secure registry (blockchain). Each company is managed by a specific smart-contract and its address is public and included in the corporate documentation of each Wyoming DAO LLC. Any deals and transfers are done in accordance with US laws.

      The essence of the USA model is as follows:
      • It is necessary to establish a DAO company in Wyoming or other jurisdiction which is.
      • There is no need to obtain any license.
      • Users shall surpass strict AML/CFT procedures.
      • Investors make decisions regarding the property and receive income depending on the number of tokens they hold.
      • Tokens may be sold on different platforms and exchanges without loss of their value.

      Crowdfunding in real estate tokenization

      Crowdfunding is a way of raising money to finance projects and businesses. It enables fundraisers to collect money from a large number of people via online platforms. Crowdfunding is most often used by startup companies or growing businesses as a way of accessing alternative funds. Crowdfunding is the licensed business all over the world and we can suggest many comfortable jurisdictions to incorporate a Crowdfunding platform.

      Solution 1. Establishing an European company with a crowdfunding license.

      According to art. 3 Regulation (EU) 2020/1503 on European crowdfunding service providers crowdfunding services shall only be provided by legal persons that are established in the Union and that have been authorised as crowdfunding service providers. According to art. 12 a legal person who intends to provide crowdfunding services shall apply to the competent authority of the Member State where it is established for authorisation as a crowdfunding service provider So, if you create a company in Europe, it's legally required to have a license in the country where the company is established.

      Solution 2. Establishing a new local company with a crowdfunding license in Canada.

      We suggest incorporating a new company in Canada in order to avoid falling under the EU regulation. By shifting a focus away from the European market, it makes possible to minimize regulatory requirements and operational risks while still capitalizing on the less strict Canadian regulations. The Canadian regulator allows us to work with clients outside of Canada and we can assist in launching such a company.

      Solution 3. We are ready to create a digital platform for partial investment in real estate, which is based in Dubai (hereinafter referred to as the Platform/Stake). Using such a platform, the user can easily invest any amount in the property that is listed on the platform. UAE gives a variety of tools for incorporating an investment. For example, it can be a company registered with the Dubai International Financial Center (DIFC) and regulated by the Dubai Financial Services Authority (DFSA). Such company may obtain a crowdfunding license and support the incorporation of SPV (special purpose vehicle) for each property listed on the platform namaged by the Dubai company.

      Why Work With Manimama?

      • Expertise in Blockchain and Digital Asset
      • Experience with Tokenization Projects
      • Comprehensive Legal Support
      • Tailored Legal Strategies
      • Regulatory Compliance
      • Risk Management and Dispute Resolution
      • Industry Connections
      • Confidentiality and Trust

      If you need legal expertise for your tokenisation project, please do contact our legal team who can help you get your project launched.

      Frequently Asked Questions

      • What is real estate tokenization, and how does it differ from traditional real estate investments?
        Real estate tokenization is the process of representing ownership of a property (or portfolio) through digital tokens on a blockchain, allowing for fractionalized ownership and easier trading compared to traditional whole-property investments.
      • What are the potential benefits of tokenization for both investors and property owners?
        Investors benefit from increased liquidity, lower investment barriers, and potential diversification, while property owners gain access to a wider pool of capital and can streamline the sale process.
      • How is the secure storage and management of digital real estate tokens ensured?
        Secure storage of tokens typically involves a combination of specialized cryptocurrency wallets and custody services, with the exact security measures depending on the platform and specific token.
      • How does real estate tokenization impact property valuation?
        Tokenization can potentially make valuation more transparent due to increased data availability, and the fractionalization may lead to a broader range of valuations based on individual token prices.
      • What are the risks involved in investing in tokenized real estate?
        Risks include market volatility, regulatory uncertainty, potential technology failure, and the inherent risks associated with the underlying real estate asset.
      • Where can investors find and participate in real estate tokenization offerings?
        Investors can find offerings on specialized real estate tokenization platforms, through some security token exchanges, or directly from companies issuing the tokens.

      Client Feedbacks

      "Having worked at Manimama OU for the past two years, I can confidently affirm that its legal expertise in fintech is unparalleled".

      "Manimama is not just a legal advisor. They are thrusted partners who support us during 3 year while tokenisation of real estate all over the world".

      "If you seek a law firm that combines deep knowledge with a dynamic approach, Manimama OU stands out as a prime choice."

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