NEWS ON THE BLOCK(CHAIN)
Good morning, Term Sheet readers.
In the first offering of its kind, U.S. investors can now acquire a piece of South Carolina real estate in the form of blockchain tokens. The tokens represent ownership in a luxury student residence called The Hub, which is located near the University of South Carolina in the state’s capital.
This is the first tokenized REIT in the U.S. The owner, Convexity Properties, aims to raise $20 million with the token sale by letting accredited investors buy in for as little as $21,000. The buyers will receive tokens that amount to securities, which they will eventually be able to sell on cryptocurrency exchanges.
The company behind the ordeal is Harbor, a tokenized securities startup backed by investors including Founders Fund, Andreessen Horowitz, Pantera Capital, Craft Ventures, and Signia Venture Partners. You might remember the startup from Term Sheet’s Q&A with CEO Josh Stein.
Stein’s big vision is to tokenize all sorts of assets — from fine art to real estate — and make them available in the form of blockchain tokens. In May, he told me that with tokenization technology, you could create leveraged longs and shorts. He said:
You can go long French impressionists and short modern art. You can do the same with real estate — I tear off a 10% strip of all my Class A in Midtown and create a Midtown fund. I can go long Manhattan, I can go short Brooklyn. Yes, there will be some gambling going on, but what’s interesting is that if I’m a property developer and I just put a huge amount of capital into Manhattan, I could effectively hedge my position very cheaply and efficiently.
This idea may sound far-fetched, but Harbor isn’t the only company working on it. On Monday, Coinbase, Blockchain Capital, and several other investors poured $12.75 million into Securitize, an issuance platform for asset-backed security tokens on the blockchain. Earlier this month, AlphaPoint, a company that helps institutions launch trading platforms and tokenize assets with blockchain technology, hired a former senior executive from the Chicago Board Options Exchange (CBOE) to lead its trading and exchange business.
More broadly, security tokens are an interesting segment of the crypto market because they’re backed by real assets such as an equity, shares of a limited partnership company, or commodities. They are also subject to federal security regulations. J.P. Morgan’s co-president Daniel Pinto said earlier this year, “The tokenization of the economy, for me, is real.”
Correction: Yesterday, Term Sheet linked to the wrong Quip. It was New York-based dental care startup Quip that raised $40 million in funding.
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HEALTH AND LIFE SCIENCES DEALS
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PRIVATE EQUITY DEALS
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