The Future of Real Estate: Stablecoins, Onchain Settlement and RWAs

Transcript

Hi everyone, my name is Denitsa, co-founder of Propy, and today we are going to talk about everything on-chain real estate. So, I will try to cover all the use cases uh that we are aware so far, what's working, what's not. Um Is it everything okay with the mic? Should I move a bit? Mhm. Okay, so um as I said, uh everything real estate on-chain is something that is connected to the way we will buy real estate in the future, and what we have today. Um it's very obvious that we can do a lot of things

uh in the financial sense. We can transfer billions within uh like uh minutes. We can open bank accounts on our phone quite fast. Um Um but buying and selling real estate is still like a 30-to-45-day experience, um and it's not something that is, let's say, 21st-century friendly experience. Uh but there is a big um change happening, and it's not about the tech. Tech is uh one thing. There is a big change in terms of the behavior, and the biggest buyer pool out there, it's already this new generation. Uh a big disclaimer, my data here it's more

US-related, but I think it's quite representative of the whole trend. So, the the biggest buyer pool that emerged um let's say post-COVID, it's already millennial Gen Z, where uh they represent one um like 1/3 of them hold crypto, and more than 1/3 would use crypto for um to buy real estate. Having this in mind, um we um we have to think about the other side. This generation is used to this instant experience for everything. And when it comes to buying real estate, it's a big struggle. So, how do we tackle this?

It's really a straight-forward process. First and very important part when it talks about when we talk about real estate closing, how to make them fast, uh we need to to um and here is where uh crypto plays a big part and blockchain technology plays a big part. This is where smart smart contract stays the role of the escrow. In United States, that escrow and title, that's like a licensed entity. In Europe, these are the notaries we're talking about. So, technology is overtaking this function. No need of human, so to say.

Number two, we know with the development of AI technology, and I'll show you a little bit later, um pretty big part of the process is being automated. Um so, this leads to instant transactions that are possible 24/7, and of course happy buyers and sellers. And number four, which is like the North Star here, uh something that we haven't achieved today uh as um general acceptance, but it's technologically possible and we're doing that, it's the title to leave on chain.

And this would enable this whole uh new era of real estate on chain. Uh so, let me just give you a little bit of overview. Bear with me. I would be very fast, but I have to explain what Propy is doing uh very quickly. Um So, when it comes to AI, think about this, AI really helps to expedite the first part of the transaction. When it comes to offers, purchase agreements, forms, quite some of the paperwork can be automated, quite some of the job can be done nowadays by AI. There is a lot of manual checks that usually some administrator in United States or

notary here, they would do some manual checks, calling the banks, so on and so forth. Now, this is done by AI agent. So, so the transaction really speed up by the time you go into the closing moment where money are being sent and everything is being checked and then ownership is being transferred. And this is where, as I said, smart contracts place replaces the escrow function of of a real estate transactions. And then the last step is when you have when you have the title deed insurance.

One is on-chain title and the other one is, of course, people still rely and would like to have the paper title and also our governments as well. Again, very fast, what are the benefits of having kind of the standard that we built at Propy? From one side, all buyers, sellers, everyone involved is tracking what's going on live. Everything is pretty straightforward as the steps in one transaction, so nothing is like a black box anymore.

Very important part is no more emails. Like wire fraud, it's a big, big, big problem when it comes to sending wire instructions on email. This is a very weak point of a transaction, actually. So, this is being eliminated. Again, once again, this this settlement on chain and and the title on chain is actually something that it's already in US. You can use it in the court in case something happened during the process or in case the paper title got compromised. For some reason, and again, up to 70% of the transaction can be automated. So, um when it comes to payments, um what I showed you before works perfectly

with banks and fiat payments, but of course, 1/3 of the biggest buyer pool, uh they would like to use crypto. Um and this is the most classical scenario where the buyer has crypto, but the seller wants to receive fiat. And I'll just uh walk you through really fast how our Roobet property and how we do it to be like a very seamless process. Everything happens on our platform. Uh starts, of course, with source of funds KYC, then um um the the deposit goes into a Propy account. Propy Propy is a licensed title and escrow company in United States, so this uh we we are allowed to hold those

funds, but everything happens also on uh Coinbase Prime. Why? Because of this uh later part where um the the seller would receive their funds instantly. So, everything of uh what I showed you before, basically here at that uh step number six, everything happens instantly, and the seller receives their fiat money in their bank account. Now, this is, as I said, classical, um the most common uh crypto that's accepted in real estate transaction.

Actually, at the moment, this is what we accept. Um as as uh this is something that it's allowing this instantaneous uh transfer um and exchange to fiat, to say. Um but uh there is uh some buy uh sellers, especially the developers, real estate developers, builders, they would opt in to also not go into the fiat. I would like everything to be converted in fiat, but they would like to at the end hold in USDC and earn higher higher yield. Very quickly, just just to give you an idea how bigger is the yield.

Now, I I will go to another use case when it comes to the buyer. And again, buyers are holding crypto. They don't need to sell it. They don't need to give it away. They can opt in for, "Okay, I'll hold it. I will use it as a collateral." So, this is I mean, I believe every one of you knows the use case of that. I will not go super into details, but of course, um uh The The point is that we are now at the stage where buyers don't need to sell their crypto in order to use it to buy real estate. Most commonly as a down

payment. And now, maybe this is the most interesting part. I don't know who else who is here to talk about tokenization and listen about tokenization. Only one person? Usually, there are more. Usually, everyone wants to talk about this. Um And when we talk about RWA and real estate uh in the most classical case, uh this represent ownership in in some sort of a building. Most common, most interesting assets are some luxury real estate or some hotels or generating cash flow. Um But, uh I'm I'm not going to talk about

here about tokenizing the debt on real estate, because this is just it doesn't matter uh if it's real estate or not. It's a different kind of animal. Obviously, we are seeing this taking off. It's on and off hot with the crypto market but we are seeing a bigger interest now in United States, in Miami, from Miami developers product builders. Also, even though the this unfortunate situation in Middle East is happening, this still continues in Middle East. People are buying now distressed properties already in UAE and with the hope to tokenize them and

attract more buyers this way. Of course, the biggest benefit here that everyone is thinking about is this global access, right? You can instantly become owner of different assets all around the world. Um and that's kind of the vision we are talking about. But, there is a but. There are some problems and it didn't it hasn't taken off yet. Why I like to put this into six categories. The first one is we all here as crypto holders would always compare a token representing ownership of real estate with all the other crypto. And

token represent representing ownership of real estate, it's still giving way more returns than what people are used to. So, it's not as attractive or let's say we are still not at this point of portfolio diversification where we would be okay with a lower return on some token. Uh second part is the barriers to entry. Basically, this is from both sides, but I will talk about from the side of the the who wants to tokenize, the builder, the owner, whoever.

Um it is not very um straightforward process at the moment. It's quite expensive also. So, we are not at a stage where every one of us decide, "Okay, I want to tokenize my home." And I just go there and I do it instantly. Forget about it. Uh and then this brings me to the I I like to call it lack of democratization because the vision is that everyone would also be able to to have access to different real estate around the world and buy tokens just the way you can buy uh crypto on whatever exchange you can go to. Um that's also not happening at the moment. The way and the reason is number four, the

compliance regulatory framework, everything treats um real estate tokenization as a security and that's why it's unfortunately not accessible to everyone and the common people. So, it's it's um uh still not there. Um now, number five is something that is a little bit complex. I tried to make it simple for you. Um when it comes to tokenizing real estate, uh if you are the owner of the building, you have to be 100% owner. Um if you have a lender or if you have like a big hotel, this usually they have lenders, they don't like someone else to

come on the cap table, right? So, the the assets needs to be 100% um unleveraged. And and why is that? Well, that's these are the rules of the game. And um very often um these unleveraged assets, they don't need to be tokenized. So, the pool of very good assets that would be tokenized is super small actually at the moment. And number six is something that I would show you the solutions that we have, but it's still there is not a big secondary market exchange that would allow you to exit your holdings of tokens crypto real estate tokens.

Um the So, there is this exit uncertainty. So, you have to go back to point number one. You can't sell the tokens, so you just hope for some returns while holding them. Um Oh okay. Not working. Okay, I can continue. I'm sorry with this pessimistic slide, but I wanted to go to more But, okay, we can continue. If you If you want, you can try to fix it.

Why not to? Oh. Okay. Okay, so um again, I'm sure you know that, but I have to say it. In this case, the token the real estate token represents uh represents the right to an SPV, and this SPV is owner of the building. This token is usually a SEC compliant or whatever security It actually based on the geographics, but there is some sort of SEC in UAE is VARA that is regulating this. Um And And of course, the cost for that,

and I talked about it a little bit before, starts around 50,000, but it goes even higher. Um As I said, um it's treated as a security. Um It's It's a complex complex way of doing it, but it's already been done. There are some players. It's not like completely bad, but but things are just picking up now. We have also some sort of secondary trading.

Players that are doing that is real securitize INX. Um and and of course smart contracts can distribute some sort of cash flows. So, things are happening, but they're not taking off yet. Okay. So, when we think about the future of real estate, um we I believe all of us should remember that uh blockchain technology is the best technology to uh to store the ownership and to keep the ownership of real estate assets uh um

um away from fraud or destruction. So, this is the best forever record. And once you have strong ownership rights, actually we know that in every economy, um this leads to a prosperity. Now, remember again with AI and this AI era, we can make those transactions really fast. We don't need to um and that's what the buyers and all the people who are tackling in real estate should be more vocal about. We don't need to agree of this 30 day process. It's it's Um pardon my French. And then um um we would all experience instant buying and selling very very soon.

People in US are already doing it. And again, the most important part is when the title lives on chain. And once we all agree, cuz we all need to agree on that uh and accept that the title can live on chain and just move to this next level where tokenization would be way way easier. This RWA I'm talking about doesn't need to be I create an SPV and these are the shares of the SPV because you have already a deed that is living on chain, you can just tokenize the deed and things would get into and I think that this would just blow off and lead to this kind of global access and the democratization.

That's a wrap up for today and what I wanted to to tell to you is just think about how important is to have the deed on chain for everything else to follow because while property ownership is protected, this is also our path to freedom, capitalism and prosperity. Thank you. Now we have some time for questions. They are showing me I think 3 minutes. Do you have any questions? I do. Do you need a mic for everyone?

So if I understood well, you you say that the the Ethereum of the blockchain process could make much more quicker transaction I think the legal or the 30 days that you mentioned. Do you have a forecast? What's your opinion on if we reach this not instant but really quicker process? Will we have much more transactions? Will we have an increase in in the price? What are the the forecast of what this technology will produce in in the real estate in for the the 20 years to come?

20 years is really long time to do predictions. I'm afraid to do that. I can tell you how it's now. Now in United States this is possible. This 24/7 opening of transaction closing things can happen within not 30 days Uh, but let's say within a week you can do this. And it's basically more transactions. Um, a human is still involved. We are not at a stage where AI just overtakes everything. But in the past you would need one human would do one transaction for, I don't know, a week or so. Now one human has the help of AI and can verify many transactions at once. And they just just make sure that the AI is uh

is not going sideways. But but it's it makes the work uh it increased just the capacity of one office. Imagine in US that's title and escrow offices, we are title and escrow company, too. Uh in in Europe that's notaries. Uh in Europe this is still not a thing, right? But things are moving fast. I believe that notaries would also adapt to technology just like everyone else. And eventually uh when you go to a notary office, the first step would be they would be using tech, transaction will be faster. Later on, probably they won't be needed.

That's that's what we hope for. When they're not needed, we're talking about very big volume and liquidity. Back to your questions, maybe once there is big volume and liquidity, we can talk about increasing price and sort of speculation, something that's going on with all other assets that are very liquid, right? So, if that's approximate some sort of prediction, that's it. Okay. Thank you. If you have more questions, you can uh ask outside. Thank you, EVERYONE.

WELCOME.