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Institutional Investors Eye Blockchain-Tokenized Commercial Real Estate

Institutional investors will buy blockchain-tokenized shares of high-value commercial real estate when more opportunities come, says Kunal Bhasin, a digital asset co-lead at KPMG Canada.


Institutional investors will buy blockchain-tokenized shares of high-value commercial real estate when more opportunities come, says Kunal Bhasin, a digital asset co-lead at KPMG Canada.
Credit: Foretoken Media 2024

TORONTO, CA – Blockchain technology is set to transform the landscape of commercial real estate ownership, according to Kunal Bhasin, digital asset co-lead at KPMG Canada. Speaking at the Toronto Collision Conference, Bhasin explained how tokenization could enable a wider range of institutional investors, including family offices, to invest in high-value properties like Toronto’s Eaton Center.


Bhasin emphasized that tokenizing commercial real estate assets can democratize access, allowing investors who historically lacked the resources to participate. “Tokenization of commercial real estate can actually enable that,” he said, highlighting its potential as a major institutional use case in the cryptocurrency industry. However, Bhasin also noted that many institutional DeFi (decentralized finance) players prefer to operate in a more regulated environment.


Institutional Investors Favor Permissioned Blockchain Environments


While the efficiency of decentralized financial technology is recognized, institutions are cautious about knowing their transaction counterparts. Bhasin stressed the importance of know-your-client (KYC) checks in this process. He stated:


“Institutions recognize the efficiency that a decentralized financial technology brings, but they want to know the participants that they are interacting with.”

This preference for permissioned environments indicates a blend of innovation with regulatory compliance.


Adoption of Tokenized Real Estate Grows


The adoption of tokenized real estate is gradually increasing. For instance, in April, Bitfinex Securities facilitated a tokenized asset raise for a Hampton by Hilton hotel at El Salvador’s international airport. Despite its modest $342,000 raise, representing less than 6% of its $6.25 million target, it marks a step towards wider acceptance of tokenized assets.


Bhasin also pointed to other promising applications of tokenization, such as tokenized Treasuries and money market funds. He cited the BlackRock USD Institutional Digital Liquidity Fund (BUDIL), which has amassed $462.7 million since its launch in March, as evidence of growing institutional interest in blockchain-based financial products.


Reputational Risks and Industry Adoption


Despite these advancements, asset management firms and banks remain wary of the crypto space due to fraud and scams. Bhasin acknowledged this “reputational risk” but noted significant progress in mitigating these concerns. KPMG, for example, leverages blockchain analytics firm Chainalysis to identify potential illicit activities associated with its client base.


“There is fraud in every industry,” Bhasin remarked, underscoring the importance of robust infrastructure and best practices in gaining institutional trust. He also predicted a shift in industry dynamics, where avoiding digital assets could pose a career risk. Bhasin also warned:


“Soon, not being involved in crypto and digital assets is going to be a career risk. If you are not offering it today, your competitors are — and they are getting that advantage over you.”

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