Banco BTG Pactual is the largest private bank in Brazil, and is also the largest in all of Latin America, with assets under management totaling US$34.7 billion. However, ReitBZ is not available to investors in Brazil and the U.S., due to regulatory restrictions and uncertainties.
In February 2019, Banco BTG Pactual made headlines by issuing US$10 million in real estate security tokens on the Ethereum blockchain, which the company refers to as ReitBZ. ReitBZ has been used to acquire 323 real estate units, of which 181 units have been sold so far. Though currently unavailable to trade, the bank plans to launch the token on a secondary market.
The ReitBZ token allows investors to invest in Brazil’s real estate market. Investors receive periodic dividends based on the performance of the property backing the tokens. The real estate investments that make up the ReitBZ portfolio are typically only accessible to institutional and large investors. By tokenizing the portfolio, smaller investors can get exposure to large real estate investments without having to invest the high minimum amounts typically required.
Of the US$5 million in real estate to be issued on Tezos, half of the amount is part of a new raise the bank has completed, and the other half consists of ReitBZ on the Ethereum network that is being migrated over. The bank believes that diversifying which blockchain the assets are held on is important because there is no way of predicting which network will succeed in the long run.
“We don’t want to be tied to just one blockchain. Because clearly I cannot tell which blockchain will prevail,” stated Andre Portilho, head of digital assets at BTG Pactual. “We want to have other options, other blockchains that might serve better the pieces of tokenization and issuing tokens that represent real assets.”
When comparing the costs of issuing the ReitBZ as a digital asset as opposed to the traditional paper approach, Portilho noted that the formed does work out to be more expensive due to higher up-front development costs.
There are major cost savings as the number of assets issued increases however – issuing US$100 million of assets will cost a similar amount to issuing US$10 million USD of assets. The lower entry capital requirements and enhanced liquidity once on a secondary exchange are also compelling reasons for adopting a digital issuance approach.
Tezos has been touted as an ideal candidate for security token issuance, due to its’ institutional-grade smart contracts, secure custody, and upgradeability. It also features a unique on-chain governance model and a proof-of-stake consensus algorithm, which can offer superior performance over traditional proof-of-work consensus algorithms. Most recently, the Association of Chartered Certified Accountants (ACCA) announced it was exploring Tezos for accounting operations.