The self-amending blockchain prepares to launch $1 billion worth of new tokens
Brazilian investment bank BTG Pactual and Dubai-based Dalma Capital have joined forces to launch STOs worth $1 billion on Tezos, a self-amending blockchain and smart contract platform. The partnered companies’ first offering will be for ReiBZ – BTG’s real estate token. The initial STO was initiated on the Ethereum protocol earlier this year.
In addition to real estate, the firms intend to pursue offerings for prominent global sports clubs, equity and debt instruments.
“While the bank remains protocol and technology agnostic, and will continue to utilize the Ethereum protocol, we see Tezos as a global player with a robust blockchain for asset tokenization,” said Andre Portilho, a partner at BTG.
In the recent past, initial coin offerings (ICOs) that raised more than a billion dollars were not uncommon. For example, EOS, a blockchain platform that aspires to compete with Ethereum as a venue for smart contracts, raised approximately $4 billion in a year-long ICO process. After a regulatory crackdown, however, the ICO market crashed. STOs have emerged as an alternate, compliant mechanism for international investors to invest in assets across borders.
The BTG Pactual and Tezos partnership announcement, notable for the size and extent of its promised fundraise, is the first such announcement this year. The market for STOs is expected to skyrocket in the future as illiquid assets come online. However, such offerings face several hurdles related to regulation and infrastructure. The global nature of these sales means that they span multiple regulatory jurisdictions, which balloons the overall compliance costs. Despite the stated goal of making these offerings accessible to the common investor, issuance of STOs has thus far been limited mainly to accredited investors.
Banco BTG Pactual’s real estate token is backed by distressed property assets. Real estate in Brazil has undergone a bubble in recent times. Prices rose by as much as 232% in some markets between 2008 and 2015 in the South American country. They crashed following political and economic uncertainty. A slow recovery has been in progress since the beginning of this year.
BTG Pactual enables international investors to put their money into the Brazilian real estate market, specifically Rio de Janeiro and Sao Paolo.The former held the distinction of having the most expensive per square meter listing in Brazil, while the latter had the most expensive listings overall.
BTG’s real estate portfolio is focused on three niche areas within Brazil’s real estate: real estate foreclosures by developers who were denied financing post-construction of their assets; real estate assets returned by buyers who were not able to secure a bank loan; and real estate assets owned by bankrupt firms. The portfolio’s basic strategy is to buy assets at a discount of between 30% to 40%, restructure them, and resell them back for a profit.
Profit proceedings will be distributed as dividends in the form of airdrops to investors. “We believe this is an ideal time to invest in the Brazilian real estate sector,” Portilho from BTG said earlier. “In our view, we are in the early stages of price recovery and our investment thesis is supported by the country’s positive economic and regulatory outlook.”
Tezos’ Emergence as an STO Platform
While security token offerings are still in their nascent phase, Tezos is entering a crowded field of blockchain protocols. By most estimates, Ethereum is currently the most popular platform for STOs. Tezos will face competition from a slew of protocols, such as Polymath and Securitize. In fact, the latter’s success as an STO forum is a critical peg to its survival after a bruising battle with its investors. Commentators have pointed to Ethereum’s scalability and security issues as possible reasons for investors and founders to migrate to Tezos.
Tezos has waged bruising battles of its own. When it was released, the blockchain platform claimed that it would solve governance problems for cryptocurrencies. The essential idea behind a self-amending platform was to obviate the need for a hard fork by implementing a modular approach that made it possible to resolve contentious design arguments through replacement of specific elements. But the blockchain’s founders became embroiled in their own governance issues with an investor, resulting in a significant delay to the listing of Tezos tokens.
The team at BTG Pactual does not seem to be overly concerned about the platform’s previous problems. Zachary Cefaratti, CEO of Dalma Capital, said that Tezos was a “critical” protocol for the STO market.
“BTG Pactual and Dalma Capital have been leaders in implementing tokenization and blockchain solutions in the realm of traditional investment banking and asset management,” said Hubertus Thonhauser, a principal of the Tezos Foundation. “We are encouraged by forward-thinking investment banks embracing blockchain as the market progresses to institutionalization and mass adoption.”