We live in a global world… except when it comes to investment. International regulation is a tangle of rules and listing procedures that create bureaucratic hurdles to investing internationally.
SolidBlock has pioneered a simple process to create a tradable private placement offering centered on real estate assets. Yet it’s still almost impossible to structure the investment so it’s open to investors worldwide.
The SPV Hurdle
Many jurisdictions demand that businesses raising funds must establish a special-purpose entity (SPE) or special-purpose vehicle (SPV) to do so. This is a locally-registered company created to fulfill narrow, specific or temporary objectives – in this case, solely for the purpose of fundraising.
If real estate asset owners wish to raise funds through tokenization across jurisdictions, that means setting up potentially dozens of separate tokens, one for each jurisdiction. This is costly and inefficient, and it also leads to a few other big problems:
- Advertising and promoting each local investment separately
- Bureaucratic and administrative redundancies
- Limited fundraising to the maximum allowable in each jurisdiction
- Inability to trade tokens globally
This last limitation is the most serious. Given that secondary trading is utterly essential to the liquidity of digital securities, which in turn is vital in increasing the value of these securities, this fractured solution doesn’t go far enough.
Why Global Funding?
Raising funds globally opens a vast market of potential investors, including expatriates and tuned-in real-estate insiders who were savvy about emerging markets all over the world. It also creates efficiencies of scale – allowing for global advertising and promotion of new security token offerings.
Meeting all the hurdles of different jurisdictions to create a unified investment fund has been impossible so far. But now, with the Global Index Fund model, SolidBlock is once again breaking new ground.
This model combines the best of local and global fundraising for real estate projects. It also offers investors the full liquidity that they expect from securities investment – no matter where they are in the world.
How Does the Global Token Work?
The Global Token model still requires setting up SPVs in local jurisdictions in order to market there. Investors can rest assured that their investment is fully compliant with all local regulation.
However, thanks to corporate relationships established between each region’s SPV and the umbrella organization, investors can transcend jurisdictional limitations. This lets them find new markets for buying, selling, and trading, and cash out much more easily. And it means asset owners can raise funds in a wider variety of locations.
Investors on a local level will buy a convertible note through locally licensed platforms. The convertible note will be issued by the local SPV. The note can convert to the global token at any time the investor wants to trade.
Since the Global token combines the values of the raises within each jurisdiction, it creates a much higher cap, making this model useful for a wider variety and greater scope of projects.
The umbrella organization will follow all regulatory requirements of the jurisdiction in which it is established. It is simple to choose a business- and blockchain-friendly jurisdiction. In fact, because both layers – the subsidiary and the umbrella level – both meet local compliance regulations, this model offers a higher degree of security and regulatory oversight, while virtually eliminating the challenges that have plagued international tokenized investment so far.