Real estate tokenization refers to the use of distributed ledger technology to digitally represent rights associated with real estate. By dividing investments into smaller fractions, it is expected to provide investors with lower initial investment requirements, greater investment diversification and increased liquidity. The use of tokenization in the real estate market raises various legal questions, particularly regarding the nature of the rights acquired by an investor through the purchase of a crypto token and the legal nature of crypto tokens themselves.
The master’s thesis examines direct and indirect real estate tokenization and their relationship with land registries, with an emphasis on the Slovenian legal framework. It further addresses the legal classification of crypto tokens and the distinction between crypto-assets under the MiCA Regulation and financial instruments under the MiFID II Directive. In its final part, the thesis provides a review of selected empirical studies concerning the extent to which the theoretical benefits of real estate tokenization are realised in practice.
The thesis first finds that, under currently established models of real estate tokenization, investors generally do not acquire ownership rights in real estate due to the formal requirements associated with land registries. Instead, they acquire indirect rights relating to real estate, which they enforce against the entity managing the structure. For the time being, direct tokenization remains a theoretical model, the implementation of which would require substantial changes to existing land registry systems. Second, contrary to expectations, typical forms of real estate tokenization do not meet the requirements to fall within the scope of MiCA, but instead more closely resemble financial instruments under MiFID II. Third, the empirical studies analysed confirm that real estate tokenization primarily enables investors to benefit from lower minimum investment amounts and greater investment diversification, while its advantages in terms of costs and liquidity remain more uncertain.
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