E04: The Crypto Revolution Comes to Real Estate with Alexander Kanen

In the fourth episode of the Passive Investing Show, J talks to Alexander Kanen about how crypto and blockchain are ripe to revolutionize the private equity and real estate industries. They talk about the benefits brought about by these new technologies, how we as investors can maximize its potential, and the developments that will be coming in the very near future.

Technology has continuously paved the way in reinventing old processes and concepts. Find out the exciting things that crypto and blockchain currently offer and have in store!

Here are some power takeaways from today’s conversation:

• Tokenization brings liquidity and price discovery into the real estate industry.
• Blockchain redefines ownership, making it sovereign and programmable.
• We should refrain from exaggerating the value of tokenization.
• Standards and secondary markets are needed to truly bring out the value of tokenization.

Episode Highlights:

[02:33] Down the Bitcoin Rabbit Hole

Alex started dipping his toes into bitcoin after accommodating a certain client. Gradually, they designed a protocol to conduct a real estate closing using digital asset transactions. While passionate about crypto, Alex is more focused on the technology side of things and advises people to seek professional advice before using crypto.

[07:39] Crypto and Technology in Real Estate

Blockchain brings the benefits found in public markets to the private equity and real estate space. Equity tokens are digital counterparts to existing analog systems and instruments. They fractionalize the entity that owns the real estate, not the real estate itself.

Tokenization allows people to enjoy liquidity and price discovery. When you tokenize 40% of an asset, it grants you access to larger capital pools. It lessens the friction in the paperwork process once you find an investor. It also allows you to automate compliance, building it into the token itself.

[26:36] A Word of Caution

Syndicating to millions of investors may sound tempting, but there are regulatory requirements you need to comply with. Do not exaggerate the value of tokenization and liquidity. Industry-wide standards and secondary markets are necessary for liquidity to become a reality.

[31:53] Current State of the Real Estate Industry

Tokenization is progressing fast in real estate. However, secondary markets and universal standards are still needed to attain true liquidity. Regulation will keep the processes in real estate on track. With crypto and blockchain, ownership becomes sovereign and programmable.

Notable Quotes from the Episode: 

[20:04] “Tokenization offers you to take a piece of your asset. Don’t sell the whole thing.”

[27:34] “It’s important not to exaggerate the value of tokenization. And it’s important not to exaggerate the value of liquidity in some of these cases.”

[36:16] “Little by little, [the advent of AI and blockchain is] transforming our understanding of ownership. Like we said before, it’s sovereign, programmable ownership. It is to disintermediate the gatekeepers, disintermediate the centralized points of vulnerability if you will.”

Resources Mentioned:

LinkedIn

Kanen Law