The Philippines’ First Real Estate Investment Trust in Relation to Cryptocurrencies

What is a Real Estate Investment Trust?

 

A Real Estate Investment Trust (REIT) is a corporation that primarily invests in income-generating real estate. This allows investors to directly invest in finished projects rather than the developer of real estate projects. While developers can utilize this to recycle capital for their other projects.[1] REITs allow anyone to invest in portfolios of real estate assets the same way they invest in other industries – through the purchase of individual company stock or through a mutual fund or exchange traded fund (ETF). The stockholders of a REIT earn a share of the income produced through real estate investment – without actually having to go out and buy, manage or finance property.[2] Most REITs operate along a straightforward and easily understandable business model: By leasing space and collecting rent on its real estate, the company generates income which is then paid out to shareholders in the form of dividends.[3] The Philippine Stock Exchange has recently approved the Initial Public Offering (IPO) of AREIT, the first REIT in the Philippines owned by Ayala Land.

 

Stablecoins

 

Stablecoins have collateralized stores of value that fully back the price of that cryptocurrency so due to the removal of uncertainty about whether or not a platform will be successful and gain revenue, the assets are protected by tangible stores of value.[4] Stablecoins were developed as an answer to the issue of more traditional cryptocurrencies, which is the volatility of its value. By having the cryptocurrency backed by a specific asset it stabilizes its value, guaranteeing the owners of the cryptocurrencies that its value would not dip below the value of the asset with which it is tied to. Examples of asset backed cryptocurrencies are Digix[5] and Tether [6]. These cryptocurrencies are tied to the value of gold and the US dollar, respectively. Due to their nature, stablecoins must have a sturdy legal framework to assure owners of these coins that the coins actually have the value they purport. Often this legal framework comes from regulators requiring certain capitalization equivalent to the value of the coins they wish to trade. 

 

How can REIT and Stablecoins interact?

 

With the Securities and Exchange Commission (SEC) setting itself to create regulations on cryptocurrencies as they consider these as a form of security.[7] While shares in an REIT are already regulated by the SEC being a more traditional form of securities, similarities can be seen between the two. Whereas the value of shares of stock in a REIT is based upon real estate assets which are maintained by the corporation operating it, while a stablecoin’s value is based upon the asset which it is tied to. The similarities in structure between these two can be a basis on how the SEC will later on create regulations for stablecoins. REITs can also benefit from the technology utilized by stablecoins, incorporating them in how they trade or have investors purchase shares in their business. 

 

[1] https://business.inquirer.net/302993/pse-oks-phs-first-reit-listing 

[2]https://www.reit.com/what-reit#:~:text=A%20real%20estate%20investment%20trust, grow%2C%20thrive%2C%20and%20revitalize.

[3] Id. 

[4] https://www.worldcryptoindex.com/asset-backed-cryptocurrencies

[5] https://digix.global/#/ 

[6]https://tether.to/?__cf_chl_jschl_tk__=72a686937ae2d632e6804c38407a5ace4ee539c8-1597035016-0-AbXLo2fcPRvl3It-8EqFKZeKyqKKI74hgV-X3fdf7-0wDiqYmvnoFyV_mOUDGJjZi-VOSSpewpqThoX0k8xp77WJ-NXOadIvGEYzHHKJMs3HeA-KvsgtNXulSZGalNlhR5m_cFrumv9CFVLpXcCH4-xgHfbP4JcqxQcFcQCmkEoHootDiN0T10Sp9lZSwmDEI KvSMHZSr6HngZvur15rol3l2lcTxqLPu06Ssvp0dI6yJWc5LEgfKx 5dP4NaH9VomSDYKwGK3iAWpRrApQHv_Js

[7] https://www.philstar.com/business/2018/01/30/1782565/sec-sets-conditions-initial-coin-offerings

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