With an eye on market integrity, Argentina is rolling out a national registry for crypto exchanges, signaling a tightening grip on the burgeoning sector.
Argentina‘s National Securities Commission (CNV) has launched the Virtual Asset Service Provider (VASP) registry, receiving applications from nearly a hundred individuals and legal entities, as per the government’s announcement.
The registry will accept new applications from those entities interested in offering crypto trading services in the country, with the condition that applicants would have to wait for registration confirmation before commencing operations. The commission says that of the 85 requests received from legal entities since the registry’s launch, 35 have been successfully registered so far, including four of foreign platforms without naming them.
Those who have complied with the requirement to submit registration requests to the registry would be permitted to continue operations in Argentina, while non-compliant entities would be barred from conducting activities until registered, the announcement reads.
Argentina first unveiled mandatory registry requirements for the crypto space in late March, with CNV chair Roberto E. Silva saying the country “worked against the clock to advance compliance” aimed at preventing money laundering and terrorism financing.
Despite these measures, the local crypto community has expressed concerns about increased government regulation. In an interview with Forbes, Manuel Ferrari, a member of the Argentinian NGO Directive and co-founder of the Money On Chain protocol, criticized the registry as a “terrible idea,” arguing that Bitcoin is “money, not a security.”
As crypto.news reported earlier, Argentinians are turning to Bitcoin and other cryptocurrencies as a financial refuge, leading to a rise in both legitimate transactions and scam activities. As such, the CNV’s regulation claims to mitigate these risks without stifling innovation in the crypto space.
Turkey’s Treasury and Finance Minister Mehmet Şimşek is reportedly considering a new tax on gains from investments in stocks and crypto as part of efforts to support disinflation.
Gains from activity associated with trading crypto and stocks may soon be taxed in Turkey as the country struggles with high inflation. The proposal, aimed at ensuring proper taxation of all financial income, was discussed during a recent ruling-party meeting, sources told Bloomberg.
The details of the plan remain under discussion, with new regulations expected to be addressed after parliament reviews legislation on crypto this week.
Turkey has been considering putting regulations on crypto so that the country could be removed from the Financial Action Task Force’s (FATF) “grey list.” In mid-2022, the AK Party of President Recep Tayyip Erdogan proposed a minimum capital requirement of 100 million lira (approximately million) for crypto businesses. However, no final decision has been made yet on the matter.
In early November 2023, Şimşek said the country was finally introducing crypto legislation. Speaking to the nation’s planning and budget commission, he noted that the country has met 39 of the 40 FATF standards and was in the “final stage” of compliance.
In early 2024, Şimşek emphasized that the upcoming regulations aim to mitigate the risks associated with crypto trading, protecting retail investors. Key aspects of these regulations allegedly would include legal definitions of crucial crypto-related terms such as “crypto assets,” “crypto wallets,” and “crypto asset service providers.”
Turkey has been on FATF’s “grey list” list since 2021, a status that has eroded confidence in its already fragile economy. Amid high inflation rates, cryptocurrencies have gained significant traction in Turkey, becoming an alternative financial refuge for many.
In this week’s #hearsay column, Dorian Batycka marks the 100-year anniversary of the Bohemian writer Franz Kafka’s death on June 3, 1924, taking you on a literary journey through the most “Kafkaesque” moments in all of crypto.
Imagine a world where you are ensnared in a web of bewildering and illogical situations, powerless against faceless bureaucracies that wield omnipotent and indifferent authority. This nightmarish distortion of reality is the essence of the term “Kafkaesque,” derived from the German-speaking Bohemian writer Franz Kafka. Through seminal works like The Trial (1914), TheCastle (1922), and The Metamorphosis (1912), Kafka’s narratives have become foundational texts in modern literature, depicting protagonists trapped in existential anxiety and futility. Strikingly, these Kafkaesque themes find resonance in the chaotic and often dystopian world of cryptocurrency, where the promise of financial liberation is fortuitously often overshadowed by paradox and disillusionment.
Wojak, crypto, and the Kafkaesque
Franz Kafka wrote A Hunger Artist in 1922 and published it in 1924, the same year he passed away from a brutal condition that made him die of starvation due to complications from laryngealtuberculosis. Kafka’s final story centers on a professional hunger artist who fasts for extended periods as a form of art, attracting audiences fascinated by his self-imposed suffering. Despite such dedication, the hunger artist becomes increasingly marginalized and forgotten as public interest wanes, leading to his eventual demise.
It’s a situation that mirrors the experience of crypto’s most titular figure: the wojak. The proverbial McDonald’s night manager whose incessant pursuit of quick wealth becomes an unhealthy obsession, akin to gambling. With wojak consumed by the volatile and often isolating and crippling failure of crypto trading and investment, he finds himself constantly in profound loss and disillusionment. What hunger was to Kafka’s artist, cheap packets of ramen noodles are to the toiling wage cuck hoping to get rich on a Solana meme coin. What could be more utterly Kafkaesque?
Satoshi Nakamoto as Joseph K.
Self-revelations aside, let’s shift gears to conjure the term “Kafkaesque” not with the wojak loser, but with the OG of crypto himself, Satoshi Nakamoto. In Kafka’s The Castle (1922), the protagonist K. struggles against an opaque and inaccessible bureaucratic authority; similar to Satoshi himself, Kafka speculates on the often duplicitous nature of governments, remarking: “You mustn’t believe everything that officials say,” adding, “I have my rights, and I shall get them.”
In The Trial, Kafka describes the arrest of the main character. “Someone must have been telling lies about Joseph K., he knew he had done nothing wrong but, one morning, he was arrested.” Again, one is here confronted with the brutal reality of a system bearing consequences on someone born to change it, i.e., Satoshi, or even CZ, for that matter. The lack of current regulatory clarity in crypto, from legislation being proposed in the EU, MiCA, has only created widespread confusion on the continent, through to the befuddling situation around legislation in the United States, where things have not fared much better, with both Joe Biden and Donald Trump also recently U-turning on the crypto bandwagon.
KafkaCrypto: towards a new theory of technology and doomer
Lastly, think about the idea of paradox itself, perhaps the pinnacle of all Kafkaesque situations. It’s based on a supposition that two seemingly different realities can be true at once. While cryptocurrency was designed to circumvent traditional financial systems and their regulatory frameworks, as the market has grown, so too has the demand for regulation to prevent fraud, protect consumers, and ensure market stability, often under the guise of anti-money laundering (AML) initiatives that exist in stark contrast to privacy-focused tools like Monero or Tornado Cash.
Yet, on top of this reality, a paradoxical situation has emerged: where the decentralized crypto world ethos has increasingly brushed up against the centralized systems that crypto purported to disrupt. Look no further than China’s or Russia’s recently stated that they would embrace central bank digital currencies (CBDCs). Together with omnipresent state surveillance and control, the paradoxical reality of having crypto in the hands of a tyrannical government, while at the same time allowing for encrypted financial freedom, is indeed peak Kafkaesque.
“It’s only because of their stupidity that they’re able to be so sure of themselves,” Kafka concluded in The Trial, perhaps his most seminal work on the illusory nature of justice. It is perhaps in some ways related to the notion of effective altruism prevalent in modern echelons of crypto theory, and famously core to the convinced fraudster Sam Bankman Fried’s worldview, i.e., scamming for the greater good theory of crypto capitalism.
At its heart, cryptocurrency advocates for financial autonomy and individual control over one’s economic identity. Yet, as we mark the centennial since Kafka’s death, it’s clear that the crypto industry has taken on many Kafkaesque qualities. From the mysterious figure of Satoshi Nakamoto to the lowly wojak, through to the unsettling reality of crypto scams and the paradox of decentralization and regulation, the illusory sense of autonomy stands as a remarkable bellweather to how deeply problematic crypto has and continues to be. As Kafka once wrote:
“Every revolution evaporates and leaves behind only the slime of a new bureaucracy.”
As it gained traction in the crypto industry, real estate tokenization is classified as a security in most jurisdictions with developed financial regulations, such as the United States, European Union, United Kingdom, Australia, and others. In this article, I focus on the limitations of tokenization-securitization and explore why the concept of tokenization should aim to digitize property rights instead of penetrating the very heart of land registries. In my previous article, I outlined the idea of the “title token” and the concept of the next-generation land registry—blockchain estate registry. Now, let us scrutinize the promise of securitization to illustrate why, without redesigning the system, the digital economy will not progress.
Securitization explained
Traditionally, real estate has been viewed as a valuable asset class but has presented challenges for smaller investors due to its illiquid nature and substantial upfront investment requirements. It is commonly believed that blockchain technology offers a promising solution through the tokenization of real estate. This widespread interpretation involves converting real-world assets into digital tokens tradable on a blockchain, thereby subdividing the asset into smaller, more manageable units. This approach purportedly makes investment more accessible and enhances the liquidity of real estate, as these tokens can be easily traded on secondary markets.
However, while such tokenization has garnered attention, a critical examination of its limitations is essential. The following scrutiny reveals the inadequacies of this model and underscores why a thorough redesign of the land system is imperative to ensure meaningful progress.
Essentially, such tokenization represents securitization. A typical scheme authorized by a financial regulator involves the creation of a special purpose vehicle (SPV), e.g., a corporation or a trust, where tokens represent shares or units, respectively. Rarely, when tokens represent neither of these, such security can fall under a larger category of an “investment product” or “managed investment scheme” found in regulations of many countries since the case of SEC vs Howey in the U.S. in 1946.
Economically, such a security would generally be understood as someone’s promise in exchange for cash to perform some economic venture that might result in profits. Thus, there are two sides to this deal: someone who promises something and the one who invests money. To complete this picture, there can be a secondary market where such securities are traded between those who hold them and those who want to acquire them.
When it comes to the economy around real estate, traditionally securitized property represents a small fraction of the overall property market. For instance, as of 2023, the market capitalization of US publicly traded real estate investment trusts (REITs) was approximately .4 trillion, which is 1.3% of the whole US real estate value, estimated at 3 trillion.
Source: NAREIT, Statista, courtesy of the author
This disparity highlights that securitized real estate forms only a minor segment of the broader property market. The limitation arises from the legal nature of such relations. Security is an economic interest in someone’s property (a promise secured with a legal instrument). The one who holds the security is not the property owner. The security holder does not enjoy the whole bundle of legal rights; hence, its economic application is also limited.
Security token vs. Title token: A real estate security token represents the holder’s economic interest in someone else’s property. A title token is the actual record of the property right.
Why #tothemoon won’t happen
Starting from the first wave of tokenization—also known as the initial coin offering boom—in 2016-2017, there has been unreasonable excitement around real estate tokenization, which aligns with the hype that is overall present in the crypto industry. Tokenization is associated with the potential for high profits, which are made on market bubbles.
Tokenization of real estate is advocated as a way to increase the liquidity of real property. It is usually explained that digital technology along with fractionalization will reduce the barriers and make this investment more attractive. It will, no doubt, but having real estate as the underlying asset projects the behavior of the underlying asset.
Prices on real estate are not the same as company stock markets, where business expansion and innovation can make company shares skyrocket. Usually, real estate doesn’t dramatically fluctuate; moreover, it is unlikely that one building will rapidly increase in price while the rest around it stay the same. Normally, the real property market moves all in one trend, with some minor discrepancies from region to region.
REITs and real property tokens
It is reasonable to interpolate publicly listed real estate investment trusts (REITs). Investment trusts democratize investments in real estate by reducing barriers, as these are shares of companies that own real property traded on exchanges.
It is evident that daily dollar volumes on REIT markets are much lower than on major stock exchanges. The average daily trading volume (ADTV) of the U.S. equity market exceeded 0 billion in 2023, while publicly-traded REITs often see volumes in the range of billion.
Source: NAREIT, Russell Instruments, courtesy of the author
Additionally, REIT markets exhibit lower volatility compared to the broader stock market. This stability stems from the nature of their underlying assets—real estate—which typically do not experience dramatic short-term price swings. Most importantly, public REITs go along with the general trend in the real estate market. The performance of REITs often reflects the broader trends in the real estate market because both are influenced by similar economic factors such as interest rates, economic growth, and property values.
So, the overall excitement about real estate tokenization looks more irrational. It is unreasonable to expect that tokenized property will make substantial gains, while, for example, the rest of the real estate market is stagnating. Nevertheless, with the digitalization of finance, it is reasonable to expect a reduction in transaction costs. Web3 and other digital technologies can make security markets more transparent and accountable, rendering some bureaucratic procedures redundant and obsolete. Thus, the advent of innovations can make the REIT market more efficient under the condition that the government reduces red tape to unleash the potential of digital technologies.
Now, facts and some concluding thoughts
Finally, let us explore some empirical evidence that supports this discussion. STM (Stomarket.com) is a popular resource in the world of tokenized real-world assets (RWAs). Similar to Coinmarketcap.com, it consolidates tokens, their capitalization, volumes, and other essential market data.
A closer examination shows how much smaller the tokenized RWA market is compared to the cryptocurrency market. STM’s capitalization of listed 465 ‘Real Property’ tokens is 6 million with only .7 million of trade volume per day. For comparison, Coinmarketcap’s list capitalization is .3 trillion, with .6 billion of trade volume per day of over 8,000 coins and tokens listed on the website (as of 14 May 2024). Deloitte analysis indicates more optimistic figures—.4 billion capitalization in 2022, according to their research, which is still 140 times smaller than Coinmarketcap’s list.
In summary, securitization is no revolution, and speculative excitement around the tokenization of real estate markets is far-fetched. Blockchain and other web3 technologies can make the securitization of real estate more efficient if introduced with more progressive regulations. However, securitized property constitutes just a small portion of the whole real estate market, so bringing efficiencies to this small segment does not make much of a difference.
All property rights, titles, and legal interests, in fact, are locked in government registries—old-fashioned land registries with paper-based transactions and bureaucratic registry and titling services. With web3 technologies, economic relations can become transboundary, online, instant, and peer-to-peer. Programmable relations reduce the need for intermediaries, i.e., agents, lawyers, notaries, conveyancers, and other registrars.
The old registry constitutes a bottleneck for the future of the digital economy as all this potential efficiency bumps up against the old-fashioned sluggish system. Government inertia to improve the system, i.e., automate and digitize, stifles the further evolution of the economy. In fact, the appearance of traditionally securitized and tokenized real property is a kind of response to that inefficiency. Though, as it was shown, it has a marginal effect that does not change the whole picture.
