Technology should be seen from the legal perspective as that tool to bring people closer and closer together and generate trust through technology-based products and/or services such as, for example, blockchain, obviously, as long as the activities we intend to technify are coated with legality.
The operation, process and development of the business model will be left to the decision of the promoters or entities involved in such management.
Entering fully into the Real Estate topic, it is important to highlight that in many jurisdictions the acts and contracts that have as object the constitution, transmission, modification or extinction of real rights over real estate must be recorded by Public instrument; This means that, if we use smart contracts for the transmission of real rights that, unlike traditional contracts, follow instructions that are stored in the blockchain, and that also have the ability to self-execute actions according to a series of already programmed parameters, in an immutable, transparent and secure environment, we would achieve an automated ecosystem based on a single blockchain ledger, managed by the state, resulting in unparalleled traceability, clarity, management capacity and speed in transactionality.
Using the blockchain on real estate concepts would bring about the transformation of tangible assets in the real world into tokens that are registered on the blockchain, which, in addition, would facilitate the ability of any person to acquire all or part of a tangible asset, which would generate liquidity, attract investment, cost savings and endless opportunities for a country. Although perhaps buying and/or selling a property is a common operation and we could say that in many cases it is not a complicated process, the necessary precautions must be taken and have the competent advice to investigate and successfully complete the transaction, so the blockchain would ensure the transparency of transfers increasing confidence. As is known, tokens are a representation of value in a specific ecosystem. It is a representative unit of value that is usually with the use of blockchain technology. In the case at hand, we may be faced with a non fungible token (NFT) which is different from any other token in a blockchain, therefore, in the real estate sector it is useful, since all properties are different, thus allowing to have a NFT that is representative of the property, or a fungible token that cannot be distinguished from one another, through which it could also represent a percentage of ownership of a tangible asset.
We believe it is important that initiatives such as these are addressed by the regulator and begin to test concepts so that both parties can learn first hand, based on experience, the pros and cons of this type of technology and recognize that smart contracts are really useful and can completely revolutionize the industry, with the intention of creating a consistent legal framework on the tokenization of real and personal property.
Article published by Armando Cordoba in Issue 7 of Legal Industry Reviews Panama.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.