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."

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