Democratization, innovation, accessibility, efficiency—tokenization contains so much potential. The digital security world has seen its fair share of hype, excitement, and promise. Yet, it has also faced its challenges, with many of these promises remaining unfulfilled.
This has led to a growing skepticism, especially among institutional investors who are crucial to driving this industry forward.
On the heels of Token 2049, what is clear is that the problems plaguing the tokenization space are several, and they’re hindering the development of this ecosystem to its full potential, writ large. If the current flaws in the system can be corrected, however, we’ll see growth like we’ve never seen before.
So what are these problems?
In the first place, the digital security world suffers from a lack of regulatory oversight. As Thomas Zeeb, head of Securities and Exchanges at SIX has said, “The digital space currently faces a number of key challenges. These include the absence of regulation that ensures official safety, security, stability, transparency and accountability – all of which contribute to a lack of trust. The challenge is less in the trading of assets but rather in the custody and asset servicing.”
This lack of transparency about digital asset products and their platforms contrasts with the comprehensive disclosure requirements of traditional markets. The regulatory gap and lack of transparency in digital securities have allowed for certain bad actors to take advantage of the situation and perpetrate fraud and crime, all of which discredits and destabilizes the ecosystem.
The complexity of the ecosystem has also dampened investors’ excitement - The world of tokenization remains inaccessible to those not yet fully integrated or knowledgeable about the space.
Further, a lot of investors have been underwhelmed by the products currently on offer; they don’t stand up, in many people’s eyes, to all the hype.
In reality, this is a problem of timing, and it’s a common challenge in the tech industry: every major tech advancement—from the internet to smart devices—has underachieved in the short term but wildly overachieved in the long term.
At SteelWave Digital, we’re tackling all these problems head-on.
We believe that bringing institutional investors into the ecosystem with institutional product offerings requires a globally resonant, step-by-step approach. In the current ecosystem, existing exchanges, either standalone or in networks, cannot scale to the level required for institutional investing (for instance, SteelWave’s pipeline ranges from $500-2.5 billion annually). But as the industry matures, it will eventually become possible to raise large-scale investments around institutional real estate deals—if we can get institutional investors to embrace the ecosystem’s promise and drive it forward.
That’s what we’re doing at SteelWave: driving things forward.
Our agenda is simple: provide a traditional vehicle for investing in a risk-off real estate strategy that offers outsized returns due to the current market dislocation. First, we’re raising a traditional $500 million fund to acquire office and life science assets fully leased on a long-term basis to tech tenants in major Western U.S. tech hubs. It’s a straightforward asset aggregation strategy involving institutional buildings with long-dated leases.
But here’s the digital twist: we’ll offer our limited partnership investors a zero-cost option to convert their traditional LP interests into digital securities (tokens), should the ecosystem mature to a point where seamless secondary liquidity is possible.
In short, we’re giving investors the option to participate today in the promise of tomorrow’s financial ecosystem.
We anticipate fund-level returns in the high teens to low twenties, positioning us at the forefront of this groundbreaking intersection of commercial real estate and decentralized finance. And this model, our model, can be replicated across industries.
Tokenization has the potential to revolutionize real estate and other industries—it can open up new worlds of investment opportunities through fractional ownership. It can democratize, decentralize, and transform assets like real estate into a liquid asset class, offering a wider array of investors access to growth opportunities they’ve never had access to before.
Yes, decentralized finance promises the world a new paradigm in financial services. But for these dreams to be fully realized, however, global regulations must be erected, compliance elements integrated, and custody of digital securities secured - This is the challenge and opportunity facing industry-leaders like SteelWave Digital, and we plan to rise to it.
We’re doing our part to develop the institutional trust necessary for the flourishing of the ecosystem because we believe in this future. And what we’re doing in real estate can be applied across sectors to help usher in the decentralized finance era.
