What “Real Estate Tokenization” Really Means

Tokenization converts economic rights related to a property into digital tokens recorded on a blockchain. Most Swiss implementations do not put the land register itself on-chain. Instead, they wrap economic interests—equity in an SPV that owns the property, or a bond-like instrument that conveys future income—into tokens whose transfers are secured and settled on a distributed ledger.

1) Why it matters:

• Access: fractional tickets open prime assets to a broader investor base

• Liquidity (in theory): a regulated secondary market could allow near-instant transfers versus months in traditional transactions

• Programmability: smart contracts can automate distributions (rents, coupons), governance votes, or transfer restrictions

• Transparency: on-chain movements are auditable; off-chain registries remain crucial for identity and compliance

2) The BrickMark Zurich Case: What Actually Happened

In early 2020, BrickMark announced a landmark transaction on Bahnhofstrasse 52, Zurich. The structure was a share deal: acquisition of the majority stake in the company owning the building, with a portion of the purchase price paid in BrickMark tokens. Technically, BrickMark used Ethereum-based tokens to represent a perpetual, bond-like right tied to the property’s economic performance (rents and capital appreciation) and embedded basic governance mechanics.

Why it’s seminal:

• It showed that institutional sellers could accept digital instruments as part of consideration

• It scaled beyond earlier Swiss pilots (e.g., smaller residential/commercial tokenizations) by moving into prime commercial territory

• It combined familiar corporate-law plumbing (SPVs, share deals) with on-chain transferability of economic rights, without challenging the land registry’s legal primacy

Equally important—what it didn’t do:

• It did not make the land register itself run on blockchain

• Tokens did not equal direct real property title; they embodied financial/contractual rights against the issuer/SPV

3) Token Design: From Smart Contracts to Investor Rights

Most Swiss real-estate tokens today are asset tokens on public chains (often Ethereum). The smart contract encodes supply, transfer logic, and (sometimes) whitelisting and payout functions. More advanced “security-token” standards (e.g., ERC-1400 family) support compliance by design (KYC gating, transfer restrictions by jurisdiction or investor status).

Key design choices:

• Legal wrapper: equity (tokenized shares), debt (tokenized notes), or hybrid revenue-sharing

• On/off-chain split: identities, KYC files, and governing documents are off-chain with a regulated intermediary; on-chain holds pseudonymous addresses and token balances

• Distribution logic: smart contracts can push pro-rata rent or coupon distributions; many issuers still execute payouts off-chain to preserve compliance and accounting clarity

• Custody: self-custody is possible; institutions often prefer qualified custodians with disaster recovery and key management

4) Swiss Legal Framework: Opportunities with Clear Guardrails

4.1 FINMA’s Token Classification

FINMA groups tokens by function:

• Payment tokens (means of payment; AML rules apply)

• Utility tokens (access to a service; outside securities rules only if pure utility at issuance)

• Asset tokens (economic rights similar to shares/bonds/fund interests)

Real-estate tokens are virtually always asset tokens, i.e., securities under Swiss law. That triggers the familiar toolbox: prospectus duties, conduct rules, and—depending on the operating model—licensing.

4.2 FinSA (LSerFi): Prospectus & Conduct

If you offer securities to the public in Switzerland (retail), you generally need a prospectus reviewed by a Prospectus Review Body. There are exemptions (e.g., private placements, small offers), but promoting tokens widely to non-qualified investors without a prospectus is a regulatory and litigation risk.

FinSA also imposes conduct rules on financial service providers (client classification; appropriateness/suitability; information and documentation duties). If you distribute tokenized real-estate instruments to retail clients, you must run proper KYC, assess suitability, explain risks (market, liquidity, tech, counterparty), and keep records.

4.3 FinIA (LIsFi): Who Needs a License?

Token issuers who only issue their own securities may not require prior FINMA approval. But once you:

• Manage assets for third parties

• Run a trading venue

• Operate as a securities firm/custodian

…you can fall under FinIA licensing (asset manager, fund manager, securities firm) or under FMIA (market infrastructure). The DLT Trading Facility license under the DLT Act enables supervised markets for DLT-securities, including direct client access, provided strict governance, AML, and investor-protection requirements are met.

4.4 AML/KYC (LRD/AMLA)

Where there’s fiat on/off-ramp or intermediation (exchange, broker, platform), Swiss AML rules bite. Expect:

• Identification of contracting parties and beneficial owners

• Ongoing monitoring and suspicious activity reporting

• Membership in an SRO or direct FINMA supervision

Pure “self-issuance” isn’t a free pass if your business model effectively intermediates trades or funds flows.

4.5 Data Protection (nLPD) and GDPR

KYC files, investor profiles, transaction records, and wallet linkages are personal data. Under the updated Swiss nLPD (aligned with GDPR principles), you need:

• Lawful basis and transparency

• Data minimization and security

• Breach notification procedures

• Cross-border transfer safeguards

Because blockchains are immutable, do not write personal data on-chain. Use pseudonymous identifiers on-chain and keep identities off-chain with access controls.

4.6 DLT Act: Legal Recognition of Ledger-Based Securities

The DLT Act introduced “register-based uncertificated securities” (Registerwertrechte). Properly constituted, a token can embody a claim or membership right with full legal effect and exclusive transfer via the DLT system specified in the issuance terms. This is a major step: it gives clear legal rails to tokenized shares/bonds. But: land ownership itself remains anchored in the land register. Tokens can represent financial rights to a property’s economics or shares in its SPV—not a direct real right in rem over the parcel.

5) Investor Lens: Upsides, Risks, and Practical Checks

5.1 Upsides

• Fractional access to prime assets with smaller tickets

• Potential liquidity on regulated secondary venues (still maturing)

• Operational efficiency (faster settlement, programmable distributions)

• Portfolio innovation (tranching, automated governance)

5.2 Core Risks

• Liquidity reality vs promise: secondary markets are improving but thin; exit timing may be uncertain

• Valuation drift: token prices can deviate from property fundamentals, especially with speculation or limited market depth

• Counterparty & structure: your rights are typically against an issuer/SPV; read covenants, pledges, and priority of claims

• Smart-contract & custody: audit quality, key management, and incident response matter

• Regulatory hygiene: prospectus exemptions may not cover aggressive marketing; mis-selling and disclosure gaps create liability

5.3 Due-Diligence Shortlist (Practical)

• What is the legal wrapper? Equity, debt, or revenue-share? Who’s the obligor?

• Where is the asset? Verify title and encumbrances at the land register; confirm leases, WAULT, capex

• Cash waterfall: how are rents routed? Any senior lenders ahead of token holders?

• Governance: voting rights, information rights, change-of-control triggers, and conflicts policy

• Compliance stack: prospectus (if public), client classification, AML/KYC, data protection

• Secondary market: is there a licensed venue? What transfer restrictions apply (jurisdiction, investor class)?

• Service providers: auditor, legal counsel, custodian, valuation agent, and their mandates

6) What BrickMark Signaled to the Market

• Institutional comfort can be built: a blue-chip seller accepted tokens as part of consideration

• Hybridization works: classic SPV/share-deal mechanics plus ledger-based securities for the economics

• Scaling pathway: start with qualified investors, build regulatory muscle and track record, then explore a controlled retail rollout via prospectus and regulated venues

7) Europe and What Comes Next

While security tokens remain under MiFID II/Prospectus in the EU, the DLT Pilot Regime enables supervised experimentation with tokenized securities infrastructures. Expect:

• More regulated ATS-style markets for tokenized real estate shares/notes

• Standardized disclosure templates specific to real-estate tokens

• Integration with bank channels (custody, wealth platforms)

• Careful convergence of on-chain settlement with traditional registrars and CSDs

8) Bottom Line for Investors

Real estate tokenization in Switzerland is legally possible and increasingly institutionally credible—provided you treat the tokens as what they are: securities with all the usual duties and protections, not magic shortcuts to land ownership. For professionals, the playbook is familiar: prospectus or exemption; conduct rules; licenses where needed; AML; privacy; solid contracts; reliable service providers. For retail, diversification and access are real upsides—but only with clear disclosures, credible venues, and patience about liquidity.

Sources

• FINMA – Guidelines for ICOs; AML/financial market supervision materials

• Swiss Federal Council / Swiss Parliament – DLT Act materials; Code of Obligations updates (register-based securities)

• SIX Digital Exchange (SDX) – Public supervisory announcements and licensing news

• BrickMark – Public statements, white papers, and investor materials

• Swissinfo (SWI) – Reporting on Swiss tokenization pilots and market context

• CoinDesk / Cointelegraph – Industry coverage of the BrickMark Zurich transaction

• Academic & legal commentary (law firms’ client notes; books/chapters on Swiss DLT law and tokenized real estate)

• European sources on DLT Pilot Regime and MiFID II/Prospectus interactions