International Regulations for Tokenized Real Estate

Real estate tokenization regulations vary significantly across jurisdictions. This guide provides an overview of key regulatory frameworks outside the United States.

European Union

MiCA (Markets in Crypto-Assets Regulation)

The EU's comprehensive crypto regulation framework (Official EU MiCA Regulation):

• Scope: Covers crypto-assets, including utility tokens and stablecoins
• Security Tokens: Real estate tokens typically fall under existing securities regulations (MiFID II), not MiCA
• Status: Fully applicable since December 30, 2024
• Transitional Periods: Existing operators have until 2025-2026 depending on member state
• Licensing: Over 50 Crypto-Asset Service Provider (CASP) licenses issued across the EU
• Passporting: Licensed entities can operate across all EU member states
• Asset-Referenced Tokens (ARTs): Tokens backed by real estate or other assets require whitepaper approval and reserve backing

MiFID II and Prospectus Regulation

For tokenized securities in the EU:

• Prospectus Requirements: Securities offerings over €8 million require a prospectus
• Small Offerings Exemption: Under €8 million may qualify for exemptions
• Crowdfunding Regulation: EU crowdfunding regime for smaller raises
• Authorized Investment Firms: Distribution requires licensed entities

Key EU Jurisdictions

Germany

• BaFin regulates securities and crypto assets
• Electronic Securities Act (eWpG) enables tokenized securities
• Crypto custody license requirements
• Progressive framework for digital assets

France

• AMF regulates securities offerings
• PSAN registration for crypto service providers
• Digital Asset Service Providers (DASP) licensing
• Active market for tokenized real estate

Luxembourg

• CSSF oversight of securities
• Blockchain-friendly legal framework
• Strong fund domicile for tokenized vehicles
• DLT law recognizes blockchain-based securities

Switzerland

• FINMA regulates securities and tokens
• DLT Act provides comprehensive framework
• Crypto-friendly banking environment
• Categories: Payment, utility, and asset tokens

United Kingdom

Post-Brexit, the UK has its own evolving framework:

FCA Regulation

• Financial Conduct Authority oversees securities
• Security tokens subject to existing securities law
• Crypto registration for AML purposes
• Regulatory sandbox for innovation

Key Requirements:

• Prospectus for public offers over £8 million
• Authorized persons for distribution
• AML registration mandatory
• Marketing restrictions for high-risk investments

Evolving Framework:

• Consultation on crypto regulation ongoing
• Digital Securities Sandbox proposed
• Potential for tailored DLT legislation

Asia-Pacific

Singapore

Monetary Authority of Singapore (MAS) regulation (MAS Digital Token Guidance):

• Securities and Futures Act: Applies to security tokens
• Payment Services Act: For payment and utility tokens
• Licensed Capital Markets Services: Required for dealing
• Recognized Market Operators: For trading platforms
• Regulatory Sandbox: Available for innovation

Singapore has been noted by industry observers as having a relatively developed regulatory framework for digital assets in Asia.

Hong Kong

Securities and Futures Commission (SFC) oversight:

• Securities Regulation: Tokenized securities under existing law
• Type 1 and Type 7 Licenses: For dealing and automated trading
• Virtual Asset Trading Platforms: Licensing regime
• Professional Investor Focus: Retail restrictions exist

Japan

Financial Services Agency (FSA) regulation:

• Financial Instruments and Exchange Act: Covers security tokens
• Security Token Offerings (STOs): Regulated framework
• Self-Regulatory Organization: JSTOA for industry standards
• Strict Compliance: Conservative regulatory approach

Australia

Australian Securities and Investments Commission (ASIC):

• Corporations Act: Applies to security tokens
• Australian Financial Services License: Required for dealing
• Disclosure Requirements: Prospectus or exemptions
• Consumer Protection: Strong investor safeguards

Middle East

United Arab Emirates

The UAE has multiple regulatory frameworks across its jurisdictions:

Dubai Mainland (VARA) (VARA Official Website)

• Virtual Assets Regulatory Authority established in 2022
• Comprehensive virtual asset licensing framework
• Categories include exchange, broker-dealer, custody, and advisory services
• Mandatory licensing for all virtual asset service providers operating in Dubai
• Progressive approach with clear compliance requirements

Dubai (DIFC/DFSA)

• Digital Securities Regime established in the financial free zone
• Security Token Framework
• Licensed crowdfunding platforms
• Innovation testing license

Abu Dhabi (ADGM/FSRA)

• Comprehensive digital assets framework
• Regulated crypto activity
• Security token framework
• Progressive approach to tokenization

Bahrain

Central Bank of Bahrain regulation:

• Crypto-asset regulations established
• Sandbox for digital assets
• Licensed exchanges operating
• Regional hub aspirations

Regulatory Considerations for International Offerings

Cross-Border Challenges

• Different definitions of securities
• Varying investor qualification requirements
• Multiple license requirements
• Tax treaty considerations
• Currency and exchange controls

Common Requirements

Most jurisdictions require:

1. Prospectus or Equivalent: Disclosure document for public offerings
2. Licensed Intermediaries: Authorized firms for distribution
3. AML/KYC Compliance: Identity verification and screening
4. Investor Categorization: Professional vs. retail distinctions
5. Ongoing Reporting: Post-offering disclosure obligations

Regulatory Arbitrage Risks

• Choosing jurisdictions solely for light regulation is risky
• Regulators coordinate internationally
• Investors from other jurisdictions may trigger requirements
• Reputation matters for platform credibility

Emerging Trends

Regulatory Convergence

• IOSCO (International Organization of Securities Commissions) guidance
• FATF recommendations for virtual assets
• EU influence on neighboring jurisdictions
• Mutual recognition discussions

Innovation Sandboxes

Many regulators offer sandboxes:

• Test new products with limited risk
• Regulatory guidance during development
• Path to full authorization
• Collaborative approach to innovation

Central Bank Digital Currencies (CBDCs)

Potential impact on tokenization:

• Settlement infrastructure improvements
• Interoperability possibilities
• Regulatory clarity spillover
• New business models

Key Takeaways

• Regulations vary significantly by jurisdiction
• Security tokens generally fall under existing securities laws
• The EU provides a relatively harmonized framework
• Asia-Pacific has diverse approaches, with Singapore leading
• Middle Eastern jurisdictions are actively developing frameworks
• Cross-border offerings require careful multi-jurisdictional analysis
• Regulatory sandboxes offer paths for innovation
• Always obtain local legal advice before investing or issuing

Important Disclaimer

This overview is for educational purposes only and does not constitute legal advice. Regulations change frequently, and specific requirements depend on the details of each offering and jurisdiction. Always consult with qualified legal professionals familiar with the relevant jurisdictions before making investment or business decisions.