A fully-regulated tokenized real estate fund has been approved by officials in Liechtenstein.
The AARGOS Global Real Estate Fund was approved as an alternative investment fund (AIF) by Liechtenstein’s Financial Market Authority (FMA), the company announced. The fund provides exposure to a global real estate portfolio through AARGO security tokens – built on the ethereum blockchain – with each token representing one share in the fund.
The fund was created by Ahead Wealth Solutions, a financial services provider based in the nation’s capital Vaduz, in collaboration with Bank Frick and blockchain technology provider Token Factory.
AARGO tokens have been designed to ensure only legally-compliant transactions can be executed, Token Factory said in a blog post at the beginning of the week. In other words, only investors who have completed the requisite KYC/AML forms can actually hold the token.
The fund’s tokenization will also create “greater efficiency and a higher degree of automation in the transmission process,” said Bank Frick head of fund and capital markets Raphael Haldner in a statement.
Speaking to CoinDesk, Bastiaan Don, Token Factory’s managing director, said working on a public blockchain also presented opportunities for the financial sector. Funds are protected from manipulation by a centralized entity, and being on the ERC-20 token standard means the company can readily integrate with a “growing decentralized finance (DeFi) ecosystem,” he said.
“[You could] easily integrate with, for example, lending applications, so you can get some liquidity out of your tokenized assets,” he said. Private or permissioned blockchains might have some advantages in the short-term, he said, but “people will realize that they are missing out on all the fun and great applications that are built on public blockchains.”
AIFs are EU-regulated financial vehicles that raise capital from investors and invest these funds with the purpose of making favorable returns. Although Liechtenstein is not an EU country, its businesses can operate within the single market because it complies with the bloc’s financial regulation.
The Liechtenstein government has previously said it would avoid “excessive” blockchain regulation and the FMA has previously approved a plan for offering tokenized public offerings for retail investors. Approval by the regulator means the AARGO fund can now begin onboarding assets and promoting itself to investors.