Tokenized Real Estate Is Not Automatically Liquid, Experts Warn

Tokenization can divide real estate into smaller, tradable interests, but putting an asset on a blockchain does not automatically create liquidity or eliminate traditional legal risks, industry experts warned during an ETHWomen panel in Toronto.

The “RWA Tokenization Offshore” discussion, moderated by CCN Senior Editor Dr. Guneet Kaur at the Blockchain Futurist Conference, brought together representatives from the Bahamas, British Virgin Islands and Cayman Islands.

Panelists argued that offshore financial centers could play an important role in real-world asset tokenization because they already provide legal structures for cross-border investments.

However, they repeatedly emphasized that blockchain infrastructure must be supported by enforceable contracts, independent governance, regulated trading venues and clear disclosure.

“Blockchain doesn’t replace the legal system,” BVI Finance CEO Elise Donovan said. “Investors need to know that their rights are protected, that contracts are enforceable and that investments are within a trusted legal framework.”

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Offshore Jurisdictions Compete for Tokenized Assets

Rosalyn Brown, a luxury real estate and property technology specialist at Berkshire Hathaway HomeServices Bahamas, identified three advantages supporting tokenization in the country: regulatory clarity, an established luxury property market and a tax-friendly environment.

The Bahamas introduced its Digital Assets and Registered Exchanges framework to regulate digital asset businesses and create clearer rules for the industry.

The British Virgin Islands and Cayman Islands have also implemented virtual asset service provider regimes. Donovan said these frameworks allow the jurisdictions to extend their established roles in international finance into tokenization rather than reinventing themselves.

“The BVI is not trying to become something different,” she said. “We are building on what we have done for the last 40 years.”

Donovan compared the jurisdiction’s function to plumbing: rarely the most visible component of a building, but essential to making the entire structure work. The BVI has long supplied corporate vehicles for funds, joint ventures, special-purpose entities and cross-border investments.

According to Donovan, the jurisdiction combines political stability, English common law, tax neutrality and internationally recognized financial regulation.

Danielle Pienaar, Web3 and blockchain director at Verdant Management, similarly pointed to the availability of experienced lawyers, accountants, administrators and fiduciaries in established offshore centers.

“You don’t need to use multiple jurisdictions,” she said of Cayman’s service-provider network. “You can come to Cayman as a one-stop shop.”

Tokenized Property Still Needs Legal Ownership Structures

Brown explained that tokenized real estate would typically rely on a special-purpose vehicle, or SPV, that legally owns the underlying property.

“The title will remain with the special-purpose vehicle, and then tokens will represent shares,” she said.

Under that structure, investors do not necessarily own a direct portion of the physical building or land. Instead, their tokens represent interests in the company holding the property. Rental income, capital appreciation and other distributions could then be managed through smart contracts.

That distinction must be communicated clearly to investors, according to Carey Olsen counsel Charissa Ball.

The essential question, she said, is what the token legally represents. Investors need to understand whether they own an interest in the property, an SPV, a contractual right or another instrument entirely.

Ball emphasized that tokenized products must provide detailed disclosures comparable to those expected from traditional securities. Cross-border enforceability, custody and the legal treatment of the underlying asset remain significant considerations.

Brown added that tokenized interests should trade through regulated digital asset exchanges if the sector is to establish investor confidence.

“Technology alone does not create markets,” she said. “Trust in the system does.”

Tokenization Does Not Guarantee Liquidity

Liquidity emerged as one of the panel’s most significant concerns.

Dividing an expensive property into lower-priced tokens could make it accessible to a broader group of investors. But accessibility does not guarantee that buyers will exist when token holders want to sell.

“I think people assume that because it’s tokenized, it makes it liquid, and it actually does not,” Donovan said.

She used Toronto’s CN Tower as an example. Tokenization could theoretically open an asset of that scale to smaller investors, but the underlying investment would still be real estate, with its associated valuation, demand and governance constraints.

“You still have to ask the pertinent questions,” she said. “Who governs the legal structure? Who owns the building? Who is watching the structure?”

Brown said family offices and institutional investors would be reluctant to allocate capital unless they knew their tokens could be resold. She argued that regulated exchanges may eventually need cross-border arrangements so that assets issued in one jurisdiction are not stranded on a single domestic platform.

The Bahamas also faces a more fundamental infrastructure problem: much of its land ownership record is based on a historical chain-of-title system rather than a modern centralized registry.

Brown said individual developments could place relevant title information onchain, but digitizing records across the country’s roughly 700 islands would be considerably more difficult.

Governance Failures Can Undermine RWA Projects

Pienaar warned that flawed governance can nullify the decentralization promised by tokenized projects.

She described reviewing a decentralized organization in which the founder retained an administrative token capable of overriding decisions made by the wider community.

“That is significant founder-centralization risk,” she said. “He controls the entire protocol.”

Pienaar’s team pushed for the administrative power to be removed. She also cited a separate structure in which inadequate separation between directors and supervisors allowed an individual to weaken the checks intended to protect the organization.

Her broader lesson was that tokenization projects need independent oversight before launching.

“No one person should be able to change the future of the protocol,” she said.

The panel’s consensus was that offshore jurisdictions could help tokenized assets expand by supplying established corporate structures, regulatory supervision and legal enforceability. But blockchain alone cannot solve weak governance, unclear ownership or the absence of buyers.

As Donovan put it, tokenization may broaden access to an asset—but it does not change the asset’s underlying economic reality.

Tokenized Real Estate Is Not Automatically Liquid, Offshore RWA Experts Warn

Offshore Jurisdictions Compete for Tokenized Assets

Tokenized Property Still Needs Legal Ownership Structures

Tokenization Does Not Guarantee Liquidity

Governance Failures Can Undermine RWA Projects

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