Real estate tokenization: advantages and limitations

Advocates of real estate tokenization usually present a list of benefits: invest with little money, sell at any time, receive rent automatically. The list is not made up. The problem is that it describes what the technology allows, not necessarily what happens in practice.

This article separates the two. It uses reports from international bodies and the Brazilian rules in force in October 2026. The step-by-step operation of a deal is in How real estate tokenization works.

What tokenization promises

The Financial Stability Board (FSB), the body that brings together G20 financial authorities, summarizes the potential benefits of tokenization: greater efficiency, including in clearing and settlement, lower costs, more transparency and more flexibility, with new opportunities for investors (FSB, October 2024).

In the same paragraph, the report makes the caveat that guides the rest of this article: many of these benefits “have yet to be proven”, may not be unique to tokenization and may involve trade-offs that cancel them out. That is why, according to the FSB, tokenization projects have not reached scale.

The possible advantages

Smaller fractions and broader access

A whole property is expensive. Dividing rights over it into many tokens lets more people participate with smaller amounts. The International Organization of Securities Commissions (IOSCO), which brings together capital markets regulators such as Brazil’s CVM, found “some evidence” of broader investor access in tokenized assets (IOSCO, November 2025).

Fractionalization is not exclusive to blockchain, however. Real estate funds and co-ownership arrangements have divided properties for decades, as shown in How fractional ownership of assets works.

Faster settlement

Settlement is the stage in which the money and the asset actually change hands. On a blockchain, the token transfer and the payment can happen at the same moment. IOSCO notes that tokenization can shorten settlement cycles, but observes that many participants still depend on traditional infrastructure to trade and settle.

In the case of real estate, there is an additional limit: what settles quickly is the token. Any change in ownership of the property still requires the registry office.

Automatic rules

The BIS, which brings together central banks, highlights that tokens are not just digital records: they integrate the asset record with the rules governing its transfer, which allows operations to be executed automatically when certain conditions are met (BIS, Annual Economic Report 2025). In a tokenized property, this could mean distributing rent to holders without manual intermediation.

Traceability

Every token transfer is recorded on the blockchain, with date and address. This makes it easier to audit who held each token and when. But traceability applies to the token, not to the property or to the contracts that give it value.

The limits

The token does not transfer the property

In Brazil, “ownership is transferred between living persons through the registration of the transfer deed at the Real Estate Registry” (Civil Code, art. 1,245). Buying a token does not put your name on the property record (matrícula). What you get is whatever right the legal structure behind the token defines, such as a stake in a company or a share of income. The difference is detailed in Token versus property title: what is the difference.

Rules still in dispute

The Brazilian regulatory environment is under construction, and recent decisions have been restrictive:

• The Office of the Inspector General of Justice of Rio Grande do Sul (Corregedoria-Geral da Justiça, the state court body that oversees registry offices) suspended, on October 24, 2025, the 2021 state rule that allowed exchanges of properties for tokens. The suspension holds until the CNJ (Brazil’s National Council of Justice) decides the national request on the subject, and registrars must refuse deeds that link properties to tokens (TJRS, order of October 24, 2025).
• São Paulo and Santa Catarina adopted similar bans, described in Does a token represent legal ownership of a property?.
• Resolution 1,551/2025 of the Federal Council of Real Estate Brokers (Cofeci), which created a system of digital real estate transactions and defined tokenization (ConJur, May 2026), was challenged in Federal Court by the ONR (the national operator of electronic property registration). According to Registro de Imóveis do Brasil, the 21st Federal Court of the Federal District suspended the resolution in October 2025 and, in February 2026, declared void the linking of property records to tokens provided for in it, finding that the rule “violated the exclusive competence of the Union” (RIB, February 2026). It is a first-instance decision.

As of October 8, 2026, the editorial team has not found a national CNJ rule on the subject. This means that business models valid today may have to change when it arrives.

The weight of the CVM

When the token works as an investment, with money from many people and returns that depend on the work of third parties, it may be a security. The CVM (Brazil’s securities regulator) says this classification depends on the “economic substance of the rights conferred on their holders” (CVM, Guidance Opinion 40/2022).

In 2023, the CVM’s technical staff reported having detected issuances and public offerings of receivables-backed tokens with the characteristics of securities “without compliance with the rules applicable to the capital markets”. The same letter clarifies that some of these offerings may be made under the crowdfunding regime of CVM Resolution 88/2022 (CVM, Circular Letter 4/2023/CVM/SSE).

There is also a boundary with the Central Bank. Law 14,478/2022, which regulates virtual asset service providers, excludes from the concept of virtual asset “representations of assets whose issuance, book-entry, trading or settlement is provided for by law or regulation, such as securities” (Law 14,478/2022, art. 3). In other words, using blockchain does not take a security out of the reach of CVM rules.

For those structuring the deal, this brings compliance costs. For investors, it brings protection: disclosure and offering rules that do not exist in an informal token sale.

Liquidity that may be only apparent

This is perhaps the most important limit from the investor’s point of view. The FSB warns that a token representing part of an asset can give “a false impression” of broad liquidity, even when the reference asset is not liquid. In times of stress, mass redemption requests may force the issuer to sell the asset in an illiquid market, which knocks down the price of the tokens (FSB, 2024).

IOSCO reaches a similar conclusion with market data: many of the promised benefits, “particularly with respect to secondary market liquidity”, appear not to have been fully achieved so far (IOSCO, 2025).

Real estate is an asset that takes time to sell. Turning it into tokens does not create buyers. If no one wants to buy your token, the speed of the blockchain does not help.

Token price and property value may diverge

The price of a token depends on information that comes from outside the blockchain, such as property appraisals and rental data. Whoever brings this data onto the blockchain is called an oracle. The FSB points out that relying on unregulated oracles can make it harder to value tokens correctly, and that the price may also reflect platform, jurisdiction and issuer risk, not just the value of the property.

Dependence on the issuer and the platform

The token is worth what the issuer delivers. If the company managing the property goes bankrupt, diverts funds or simply shuts down the platform, the holder will have to pursue their rights through ordinary legal means, with the contracts as a basis. Among the obstacles cited by the FSB are the lack of legal recognition of the token outside the blockchain and doubts about the issuer’s reliability.

Technology risks

IOSCO lists legal uncertainty, operational vulnerabilities and cyber risks among the risks of tokenization. In practice, this includes smart contract failures, platform hacks and loss of wallet access keys. The basic precautions are in How to protect a wallet’s seed phrase and Phishing in digital wallets: how to protect yourself.

These risks add to those of any real estate investment, such as vacancy, tenant default and depreciation. Combined, they can lead to the total loss of the amount invested.

Scams that use the buzzword

Offerings that promise “real estate on the blockchain” with guaranteed returns use the prestige of the technology to sell something that does not exist or is not what it seems. The Rio Grande do Sul decision requires registrars to report to the Corregedoria any signs of offerings or advertising suggesting equivalence between a token and a property right. The most common warning signs are in Crypto scams: how to spot and report them.

What is changing

The landscape is not standing still. In July 2026, the CVM set up a Tokenization Working Group, with an initial duration of 120 days, to study the registration, custody, trading and settlement of securities on blockchain. As a first deliverable, the group is to propose to the CVM Board, within 60 days of being set up, an experimental regulatory regime for the tokenization of securities (CVM, July 2026).

In property registration, the ONR’s proposal to the CNJ, transcribed in the Rio Grande do Sul order, is that the use of blockchain and tokens relating to real estate should take place within the official electronic registration system, and not on parallel private platforms.

At the international level, the BIS advocates technology-neutral regulation, based on the principle “same activities, same risk, same regulatory outcomes”. IOSCO adopts the same principle. In practice, it means that calling something a token does not change the rules that apply to it.

How to weigh advantages and limits

In the editorial team’s assessment, real estate tokenization today is more promising as infrastructure than as a product for small investors. The efficiency gains depend on the token having clear legal recognition, and in Brazil that recognition does not yet exist for ownership of the property.

Faced with a concrete offering, three questions sum up the limits described here: what exactly does the token give me, who is accountable if the platform shuts down, and does the offering follow CVM rules. The comparison with a regulated product is in Real estate tokenization versus real estate funds.

What to take from this article

• Fractionalization, fast settlement and automatic rules are possible advantages, but the FSB and IOSCO say many have not yet materialized, especially liquidity.
• In Brazil, the token does not transfer the property, state oversight bodies bar linking it to the property record, the CNJ does not yet have a national rule and the CVM may require securities rules.
• Apparent liquidity, price divergence, issuer dependence and technical failures add to the normal risks of real estate and can lead to total loss.