The document discusses tokenizing real estate assets using security tokens. It outlines the benefits of tokenization such as increased liquidity, fractional ownership, and portfolio diversification. It then provides an overview of the key components of setting up a real estate security token offering, including deal structuring, technology selection, the token creation process, and ongoing governance.

1. DRAFT
Keep focus on higher added-value tasks
Framework for Real Estate
Asset Tokenization:
Security Token Offering (STO)
1
DRAFT

2. PRIVATE AND CONFIDENTIAL
DRAFTWhy Tokenize Real Estate
• Increased Liquidity
• Fractional Ownership
• Greater Transparency
• Portfolio Diversification
• Crowdfunding Marketplace
2
Forbes: Tokenization is paving the way for a new
forefront in real estate development1
https://www.forbes.com/sites/rachelwolfson/2018/10/03/a-first-for-manhattan-
30m-real-estate-property-tokenized-with-blockchain/#61e335f94895
Deloitte: The Tokenization of Assets is disrupting
financial industry, are you ready?
https://www2.deloitte.com/content/dam/Deloitte/lu/Documents/financial-
services/lu-tokenization-of-assets-disrupting-financial-industry.pdf
NASDAQ: How Tokenization Is Putting Real-World
Assets on Blockchains
https://www.nasdaq.com/articles/how-tokenization-putting-real-world-assets-
blockchains-2017-03-30
Colliers: Tokenizing Real Estate
https://www.colliers.com/en-gb/hongkong/insights/office-insider/issues/office-
insider-november-2018/tokenizing-real-estate
CNBC: How blockchain technology will reduce trade
friction for everything from real estate to fine art
https://www.cnbc.com/2018/01/29/stephen-mckeon-on-asset-based-
tokenization.html
1. Reg D rule 506(c) - https://www.sec.gov/fast-answers/answers-rule506htm.html

3. PRIVATE AND CONFIDENTIAL
DRAFT
Ecosystem -
Security
Tokenization
Offering
Legal
Compliance
Intellectual Property
Data Privacy
Contracts
Governance
Governing Law
Jurisdiction
• Issuer
• Broker/Dealer
• Custodian
Technology
Asset Mgmt.
Token issuance
KYC/AML
Investor Accrediting
E-Contract
Wallet
Blockchain platform
Crypto-Stable Coin
Markets
Custodian
Crypto Exchange/
Marketplace
Broker/Dealer
Transfer Agent

4. PRIVATE AND CONFIDENTIAL
DRAFT
Tokenization
Middle-East
Perspective
4
Issuer:
REIT
Investors:
Retail - Regional/ Global
Regulators:
Issuance & Transfer Agent:
Legal:
Crypto-Exchange:
Tokenizing and
Performance
Management:
Settlement / Custodian/
Wallet:

5. PRIVATE AND CONFIDENTIAL
DRAFT
Protocol –
How it
works?
Investor interested in
fractional ownership
Realex introduces
Property options
Investor chooses Unit
and amount to be
invested
Realex Accredits
investors KYV/AML and
registers
REALEX initiates
tokenization frontend
by creating investor
profile and off-chain
transaction
Securitize
Initiates issuance and
on-chain transaction
Wallet/ Custodian
Manages the tokens
issue
Crypto-exchange
Lists the toke on over-
the-counter (OTC)
trading
Investor
can monitor the token
performance on Realex
Dashboard
Issuer
Can manage asset
performance through
integrated REALEX asset
management

6. PRIVATE AND CONFIDENTIAL
DRAFTREALX Token Framework
6
Issuer Investor
ADGM
àREIT
REALEX
àAsset Management
{Cost/ Revenue / Yield / NAV}
Legal
àCompliance
{KYC/AML}
à Contracts
REALEX
àPricing
{Tokenomics}
REALEX < > Securitize
àSecurity Token Offering
{Accredit Investor/Funds Transfer/
Issue Token}
Custodian
Wallets/ Token Custody
Secondary Market
Token / Crypto-Exchange
B
l
o
c
k
c
h
a
i
n

7. PRIVATE AND CONFIDENTIAL
DRAFT
Issuing, managing, and enabling liquidity for
security tokens
7
ISSUANCE
( P R I M A RY I S S U A N C E )
Wallet
Management
Document
Signing
Investor
Onboarding
(KYC/AML & Accreditation)
Investment
Funding
SECONDARY TRADING
( E X C H A N G E S )
Compliance
Enforcement
Enable
Compliant
Trading
LIFECYCLE
( E X E C U T I O N O F TO K E N R I G H T S )
Cap Table
Management
Upgradeability
Governance
New Investors
(Via Trusted Security Exchanges)
Economic
Rights
Freeze,
Burn,
Reissue
Security
Token
Issuance
Investor
Dashboard
Issuer
Communications

8. PRIVATE AND CONFIDENTIAL
DRAFTSteps to Security Token Offering
• Deal structuring
• Technology selection
• Token creation and distribution
8

9. PRIVATE AND CONFIDENTIAL
DRAFTDeal Structuring
• Jurisdiction – ADGM, MAS
• Asset type – Real Estate, Art, Precious Metals, Gems
• Investor types – Accredited, Non-Accredited
• Applicable regulation –
• Shareholder Rights
9

10. PRIVATE AND CONFIDENTIAL
DRAFTJurisdictions
Americas
• Canada
• CSE
• USA
• SEC
• FINRA
Europe
• EU
• e-Money
• ESMA- AIFMD
Alternative Investment
Managers Fund Directive
• UK- FCA
• France
• loi pacte
• Malta
• Gibraltar
• Switzerland
• Estonia
• Lithuania
Middle East
• UAE
• DIFC
• ADGM-Abu Dhabi Global
Markets
• UAE-Central Bank
• UAE-SCA
Securities & Commodities
Authority
• Bahrain
APAC
• China - PRC
• Hongkong
• HKMA - Hong Kong Monetary
Authority
• SFC – Securities and Future
Commission
• Singapore
• SFA – Securities & Futures Act
• FAA – Financial Advisers Act
• PS Act – Payment Services
Act
• Japan
• PSA – Payment Services Act
• FIEA – Financial Instruments
and Exchange Act
• Korea
• Australia
10

11. PRIVATE AND CONFIDENTIAL
DRAFTReferences
• ADGM – REIT Rule Book -
http://adgm.complinet.com/net_file_store/new_rulebooks/f/u/FUNDS_VE
R01.041015.pdf
• ADGM- Regulation for Crypto Asset Activities
• http://adgm.complinet.com/net_file_store/new_rulebooks/g/u/Guidance_
Regulation_of_Crypto_Asset_Activities_in_ADGM_140519.pdf
• ADGM – Guidance on digital securities activity
• https://www.adgm.com/-/media/project/adgm/legal-
framework/documents/guidance-and-policy/guidance-for-applicants/fsra-
guidance/guidance-on-regulation-of-digital-securities-activity-in-adgm-v01-
050919.pdf
11

12. PRIVATE AND CONFIDENTIAL
DRAFTLegal Structure
• Single asset Special Purpose Vehicle (SPV)
• Real estate fund
• Project finance
• Real Estate Investment Trust (REIT)
12

13. PRIVATE AND CONFIDENTIAL
DRAFTGovernance
ADGM – Abu Dhabi Global Markets - https://www.adgm.com
ADGM is the first jurisdiction in the world to introduce a comprehensive and bespoke regulatory framework for the regulation of spot crypto
asset activities, including those undertaken by exchanges, brokers, custodians, asset managers and other intermediaries.
Chamber of Digital Commerce - https://digitalchamber.org/
Their mission is to promote the acceptance and use of digital assets and blockchain-based technologies. Through education, advocacy and
working closely with policymakers, regulatory agencies and industry, our goal is to develop an environment that fosters innovation, jobs and
investment.
GDF – Global Digital Finance- https://www.gdf.io/
Global Digital Finance is an industry body driving the acceleration and adoption of digital finance to support the next era of digital commerce,
dedicated to the advancement of next-generation technologies in finance for society.
Blockchain Alliance - https://blockchainalliance.org/
A public-private forum to help combat criminal activity on the blockchain
Security Token Network- https://token.security/stn/
Security Token Network connects the Security Token ecosystem, provides in-depth industry research for institutional finance and investors, and
delivers STOs for growth stage startups.
13

14. PRIVATE AND CONFIDENTIAL
DRAFTCrypto Token- Asset Type
14
Digital Currency Stable Coins Virtual Currency
Examples Bitcoin/ Ethereum REALEX
Tether
TrueUSD
Libra
Regulated N/A Yes Yes
Backed Proof Of Work Commodity/ Asset Fiat
Stability/ Volatility Highly Volatile Medium to Low Medium to High
Liquidity/ Recourse N/A Yes
to backed tangible
asset
Yes
to backed currency

15. PRIVATE AND CONFIDENTIAL
DRAFTCrypto Token – Offering/ Distribution
Offering Access Listing Compliance
ICO – Initial
Coin Offering
Open to all Not Always
Not
Mandatory
IEO - Initial
Exchange
Offering
Exchange
Members
only
Crypto Token
Exchange
listed
Not
Mandatory
STO - Security
Token
Offering
Accredited
Investors
STO / ATS
Exchange
Mandatory
KYC/ AML
15

16. PRIVATE AND CONFIDENTIAL
DRAFTTechnology Selection
• Blockchain / Token Definition
• Custody
• KYC / AML Vendor
• Primary / Secondary Marketplace
16

17. PRIVATE AND CONFIDENTIAL
DRAFTSecurity
1. Security Audits - ISO/IEC 27000-series1
• Advanced Persistent Threat
• Computer crime
• Vulnerabilities
• Eavesdropping
• Malware
• Spyware
• Ransomware
• Trojans
• Viruses
• Worms
• Rootkits
• Bootkits
• Keyloggers
• Screen scrapers
• Exploits
• Backdoors
• Logic bombs
• Payloads
• Denial of service
• Web shells
• Phishing
17
References:
1. https://standards.iso.org/ittf/PubliclyAvailableStandards
2. .https://www.pcisecuritystandards.org/documents/Penetration_Testing_Guidance_March_2015.pdf
3. http://www.pentest-standard.org/index.php/Main_Page
2. PCI Standards2
3. Penetration Testing Execution Standard3
4. Open Web Application Security Project (OWASP)4

18. DRAFT
18
Avadhesh Gupta
Founder, MD & CEO
LinkedIn: www.linkedin.com/in/avadheshg
Phone: +971-55-554-7984
Realex App FZE – Digitizing Real Estate
Singapore | India | UAE | Canada