The Moscow Stock Exchange is making significant strides towards innovation in the financial industry. According to Sergei Kharinov, the director of digital assets at the exchange, they are preparing to introduce a new financial product called a digital financial asset (DFA) for real estate assets by 2024. This move aims to democratize real estate investments and make them more accessible to a wider range of investors.
The National Settlement Depository (NSD) has been entrusted with overseeing the issuance and trading of the DFAs on the Moscow Stock Exchange. As one of the ten authorized operators by the Bank of Russia for DFA issuance, the NSD will play a vital role in facilitating the introduction of digital assets in the real estate industry. This move not only demonstrates the exchange’s commitment to embracing technology but also offers potential benefits to both builders and investors.
Understanding Digital Financial Assets
Unlike traditional financial instruments such as stocks or bonds, DFAs are blockchain-based digital rights recorded as program code on a distributed ledger. Essentially, they represent tokenized versions of real-world assets, in this case, real estate properties. Although DFAs do not hold the legal status of a means of payment in Russia, they offer unique advantages to investors. These advantages include the ability to divide the value of a security into multiple tokens and execute programmable transactions.
The issuance of real estate DFAs is expected to be a game-changer for builders and investors alike. Builders can now raise funds directly, in addition to traditional bank financing. The introduction of DFAs provides an alternative and potentially more efficient funding source for real estate development. On the other hand, investors gain access to real estate investments with a lower entry threshold. This opens up opportunities for both qualified and unqualified investors, enabling those with limited capital to participate in the real estate market.
DFAs can also serve as a hedge against inflation, offering investors the potential to save for future real estate purchases. In the past, Russia has issued DFAs for real estate assets that provided minimum returns and additional profits linked to the rise in the cost of square meters in housing complexes. These financial instruments were previously available to retail and unqualified investors. With the introduction of DFAs for real estate on the Moscow Stock Exchange, more individuals will have access to such investment opportunities.
The Moscow Stock Exchange’s move to introduce real estate DFAs in 2024 marks a significant step towards democratizing the real estate industry. By embracing blockchain technology and leveraging the benefits of tokenization, the exchange aims to make real estate investments more accessible to a broader range of investors. This development not only benefits builders, who can raise funds directly, but also offers investors with limited capital the chance to participate in the real estate market. As the digital financial asset market continues to evolve, DFAs have the potential to revolutionize the way people invest in real estate, providing unique advantages and opportunities for both builders and investors.