The UAE and other nations in the Middle East are embracing tokenized assets, including real estate holdings.

1. What You Need to Know About
Real Estate Tokenization in
the Middle East
Dr. Ehsan Bayat

2. What You Need to Know About Real
Estate Tokenization in the Middle East
 According to a report published by the World Economic Forum, up to 10
percent of global GDP could be stored on blockchain technology by 2025. A
wide variety of different asset classes, from commodities to stocks, is
becoming digitalized or tokenized, meaning that they can be traded and
managed using blockchain.
 The tokenization process involves representing an asset digitally on a
blockchain-based system so that it can be divided into fractional ownership.
These assets can then be traded digitally. In the world of real estate, asset
tokens can refer to anything from a share in a real estate investment trust
(REIT) to an actual piece of property. Tokenization allows for direct, peer-to-
peer trading in a secure environment without the need for third-party
involvement.

3. Benefits of Tokenization: The Growth
of Crypto-Assets
 There are several different reasons for tokenizing real estate. One of the
major benefits is the possibility of fractionalized ownership, which means
that individuals can invest with lower buy-in. Besides making ownership more
accessible, tokenization also provides some degree of liquidity. Owners can
sell fractions of ownership to get some return without completely giving up
control of an asset.
 Other benefits relate directly to the use of blockchain technology. This
technology provides an indisputable ownership ledger while facilitating asset
exchange instantly at virtually any time. Blockchain significantly enhances
both security and transparency in such transactions. This can help to combat
the lack of trust that can sometimes exist in the real estate industry.

4. Benefits of Tokenization: The Growth
of Crypto-Assets
 For its part, the Middle East has been quick to adopt new technologies,
especially in the real estate market. This fact is demonstrated by interesting
developments like Legacy One, an online real estate investment platform that
launched in Lebanon.
 The United Arab Emirates (UAE) is already anticipating the role that
blockchain technology will play in the development of real estate in the
nation. The UAE Securities and Commodities Authority (SCA) announced that
it will introduce regulations for initial coin offerings (ICOs), which is the first
sale of tokenized assets. These regulations may relate to the Emirates
Blockchain Strategy 2021, which involves the translation of 50 percent of
government transactions to a blockchain platform by 2021.

5. Creating a Regulated Crypto-Market
for Middle East Investors
 The regulations planned by the UAE will help to encourage crypto-based
fundraising and market development while guaranteeing protection against
risks and ensuring consumer protection. While blockchain in itself provides
protection, regulations will allow the UAE to keep better tabs on the real
estate industry, particularly how it is changing due to the tokenization of
property. This move represents a radical change for the UAE and its stance on
cryptocurrencies.
 In January 2017, the government effectively outlawed the use of
cryptocurrencies and digital tokens, yet various real estate brokers and
entrepreneurs began accepting bitcoin anyway. Over time, the practice
became more tolerated. More recently, the Central Bank of UAE announced
that it has plans to start its own digital currency, to be developed in
collaboration with the Saudi Arabian Monetary Authority for transnational
transactions.

6. Creating a Regulated Crypto-Market
for Middle East Investors
 Already, the Financial Services Regulatory Authority (FSRA), which oversees
the Abu Dhabi Global Markets, has begun issuing guidance on the regulation of
blockchain-based transactions that occur in the UAE. For instance, FSRA will
determine whether proposed coin token is a commodity or security. If the
token is a security, then it is subject to the body’s regulations; if it is not,
then it will go unregulated.
 In 2018 FRSA introduced regulation of crypto asset businesses, including
crypto assets exchange houses, but does not have any bearing on the issuance
of ICOs. Many hope the forthcoming regulations will help to instill even
greater confidence among investors.

7. Adoption of Asset Tokenization
Elsewhere in the Middle East
 The UAE is not the only nation in the Middle East to embrace cryptocurrencies and
associated assets in terms of the role that they could play in economic
development.
 This year, the Central Bank of Bahrain published material on crypto-assets that
recognized the growing popularity of this investment style both in the Kingdom of
Bahrain and around the world. This material aims to mitigate financial crime and
the illegal use of crypto-assets as the kingdom continues to nurture a burgeoning
financial technology ecosystem. Likewise, the Kingdom of Saudi Arabia,
recognizing the important role of bitcoin, has undertaken measures to promote
awareness about the speculative nature of cryptocurrencies.
 However, not all nations in the Middle East have been so quick to adopt these new
technologies. The central banks of both Lebanon and Jordan have banned dealings
in virtual currencies. At the same time, it is important to understand that the UAE
once did the same, but then shifted its stance when it became apparent how
significant this technology could be. With the UAE making formal guidelines about
the use of crypto-assets and the tokenization of real estate, it would not be
surprising to seeing other nations in the region following suit.