4. Real estate STO “J-FTA”



Real estate STO “J-FTA”

Over the past few years, the rise in real estate prices has boosted the market, and it has succeeded in attracting many foreign investors. In addition, the establishment of a diversified investment scheme for multiple real estates such as J-REIT has made it possible to invest in small amounts of real estate. In the real estate market, improving liquidity has been a major challenge for many years, or has been realized by providing more investment opportunities.

On the other hand, the real estate industry has become a problem of vacant homes, mainly in local governments, and there are many local cities that are forced to decline around the station due to the phenomenon of donuts gathered in suburban commercial facilities. In recent years, the number of properties that have not been found by buyers for many years has also been increasing in shopping streets. In order to solve such problems, cloud funding has been raised, and movements aimed at reusing empty houses such as old-fashioned cafés are becoming more active.

In Japan, the Real Estate Specified Joint Business Law was amended in 2017, and it was implemented as a small-scale real estate specified joint project. As a result, if real estate companies with capital of 100 million yen or more have become “small real estate” or capital of 10 million yen or more, efforts are being made to liquidate real estate. The

There is an expectation of revitalizing real estate investment, and there is an active movement in the city center to make vacant properties a core working space. However, the total amount of domestic real estate is about 2,562 trillion yen, and considering that the real estate securitization market size is 32.6 trillion yen (2017), more investment opportunities remain in the Japanese real estate market.

In fiscal 2017, 4.77 trillion yen of securitized real estate has been acquired, and condominiums with low prices are not subject to securitization. At the same time, real estate is issued as a security token and attracts attention as a new business model that seeks investment.

“Real estate security tokenization” has not been implemented again in Japan, and overseas, it has been implemented in the US and Switzerland. Advantages of automating contracts using blockchain technology and 24-hour / 365-day transactions. “Real estate security tokenization” is expected to expand the market as an attractive investment product by investors.

In the case of regular real estate investment, exchange of the Internet, e-mail, and documents is required. In the case of a security token, automatic contracts can be made using smart contracts. In addition, distributed ledger technology can monitor contracts that are unfavorable to investors and fraudulent transactions, making it virtually impossible to revise data. Japan has a security token issuance platform, and there is no actual implementation in compliance with laws and regulations such as the “Amended Asset Settlement Act” established by the Financial Services Agency.

The real estate market in Japan boasts about 2600 trillion yen, and real estate securitized by J-REITs is still about 30 trillion yen. Like “small real estate,” “real estate security tokenization” is expected to be used as a promising investment product when aiming for liquidity in the real estate market.

There are cases where the world raises funds by converting stocks and profit dividend rights into security tokens, and distributes the profits of the real estate trading platform and real estate investment business as dividends to investors. Security tokens are issued in conformity with the laws and regulations of each country, and Japan can make the best use of overseas use cases.

Under such circumstances, we are working on Japan’s first real estate security tokenization business, and we have developed “J-FTA” with a system design that divides authority among organizations from the viewpoint of investor protection.

About J-FTA

J-FTA (Japan Fractionally Tokenized Asset) is being developed in accordance with JP standards with the aim of realizing a society where many people can invest in real estate around the world by making real estate smaller.

It will be possible to transfer owners on the blockchain and automatically distribute remuneration, and decentralized management will prevent hype and fraud in real estate investments.

Smaller real estate

Smaller real estate allows investors to invest from a small amount and allows companies to do more efficiently than fund raising.

Until now, real estate investments could only be made by limited investors with financial resources, or smaller real estate could provide more investment opportunities.

Automatic distribution of revenue through smart contracts

The smart contract enables automatic distribution of dividends according to the investment amount.

Real estate companies can issue revenue dividend rights as security tokens to raise funds, and distribute real estate business revenues to investors as dividends. In addition, dividends are automatically distributed by writing in the smart contract the dividend yield and dividend timing for each real estate property.

Management and sharing of real estate information on the blockchain

Since Japan owns information with real estate agents, there is a problem that the validity of the information is not guaranteed if the information is different from the real estate company even when checking the real estate information on the Internet. The

By utilizing blockchain technology, it is said that it is possible to record in a common ledger format that is difficult to tamper with, and to improve the symmetry between seller and buyer information. “J-FTA” manages real estate information in a block chain, making it impossible to rewrite information, and improving the transparency and reliability of the real estate market.

About investor protection

J-FTA has a system design that separates authority for each organization from the viewpoint of investor protection. Based on “HyperlegerFabric”, which IBM is developing, the goal is to design a system that can achieve both high-speed processing and authority distribution. In J-FTA, each authority is assigned to each organization. By ensuring the transparency and confidentiality of transactions, we have established a system to secure the assets of investors (users).

In the current crypto asset market, ensuring compliance with KYC / AML and realizing investor protection are the most important issues, and many STO products are developing proprietary protocols that extend the ERC20 standard. The J-FTA uses the “JP standard”, which is a unique chain that complies with Japanese laws and regulations, and also has functions to forcibly cancel transactions and chargeback when fraud is detected.

Until now, insufficient customer confirmation and money laundering measures have become a problem, so each product and exchange can issue tokens that comply with laws and regulations in cooperation with protocols that implement KYC / AML. The flow of doing is born worldwide. Depending on the regulatory authority in each country, there are some regulations that set the minimum investment amount high for STO implementation, and efforts to protect investors are being carried out around the world.

Under such circumstances, “Investor Protection” is the top priority, and we believe that the spread of the “JP Standard” with system design will play a role in the soundness of the Japanese crypto asset market.

“JP standard” system design for investor protection

Role of self-regulatory organizations

Standard Capital is responsible for KYC (identity verification) and AML (manelon countermeasures) to ensure the validity of user information. Investors must also meet KYC / AML requirements when registering for an account, and will be reviewed by the exchange before sharing information on the blockchain. If the investor who wants to register is an unauthorized user, measures such as suspending the account will be taken to enable money laundering countermeasures. Self-regulatory organizations ensure that investors are protected, as it can also eliminate anti-social forces and terrorist funders. In addition, the self-regulatory organization is responsible for listing screening of security tokens and is building a system that requires a certain number of approvals. Currently, the system is being developed by “HyperlegerFabric”.

Role of transaction verification organization

Whereas self-regulatory organizations were primarily responsible for managing user information, transaction verification organizations are responsible for ensuring the authenticity of transactions themselves. The transaction verification organization verifies the investor’s J-FTA transaction, and when a certain number of verification results match, requests an approval from the transaction audit organization. Even for attacks by hacking, the system can be operated because information is distributed on the blockchain. Measures are also taken from the viewpoint of system sustainability by increasing resistance to hacking. In addition, transaction information is automated by electronic signature technology, and in the case of impersonation, it also plays a role in protecting investors, such as being registered in a blacklist.

The role of the trading audit organization

The transaction auditing organization has ultimate control over user information and transaction information. It is responsible for the final approval of transaction verification and has the authority to forcibly cancel transactions and chargeback when fraud is detected. If a user loses his / her password, a new account can be issued or assets can be transferred with a certain number of agreements. The transaction auditing organization is also responsible for the final verification of the AML and the updating of information. The transaction audit organization can access AML information in addition to user information and transaction information, but all update authority is decentralized to each organization. This ensures the confidentiality of the information.