Realizing a Sharing Economy and Democratization of Real Estate Ownership Through Security Tokens

The aggregate value of South Korea's real estate stands at approximately 15 quadrillion won (Statistics Korea, 2022), constituting a massive industry that generates an annual cash flow of roughly 190 trillion won in the development and leasing sectors alone. Real estate holds paramount significance for individuals as well. According to the 2023 Survey of Household Finances and Welfare by Statistics Korea, real estate accounts for 78% of the total assets of South Korean households—a proportion that is nearly three times higher than that of the United States (28.5%) and Japan (37.0%). However, this substantial asset allocation primarily reflects real estate held as primary residences, and ordinary individuals face numerous barriers when attempting to approach real estate from an investment paradigm. Entering the property market requires significant capital, individual participation channels remain highly restricted, and the intrinsic heterogeneity of real estate demands extensive effort and high financial literacy to identify viable investment products. Recognizing these constraints, the government has introduced various indirect real estate investment vehicles since the 2000s, including Real Estate Investment Trusts (REITs) and real estate funds, to enable the general public to share in property-generated profits with micro-capital. According to the Korea REITs Association, there are currently 24 listed REITs in the domestic market, with an aggregate Asset Under Management (AUM) of approximately 23 trillion won. This represents a mere 0.15% of the nation's total real estate value of 15 quadrillion won, implying that the scope of property covered by listed REITs remains profoundly restricted. Furthermore, while new real estate funds worth trillions of won are formed annually, public funds—which are readily accessible to retail investors—accounted for only about 1% of the new real estate funds established between 2020 and June 2024. Consequently, indirect real estate investments targeted at retail investors have failed to establish themselves as a major pillar of the overarching Korean property market, revealing structural limitations in providing sufficient optionality for investors. Recently, the growth velocity of indirect real estate investment products has decelerated, and the domestic indirect property investment market as a whole remains significantly underdeveloped compared to advanced economies. Moreover, legacy indirect investment vehicles are bound by the following operational constraints: (1) traditional funds are typically structured as 3-to-5-year closed-end vehicles, preventing premature redemption and causing liquidity frictions; and (2) REITs represent investments in a centralized property corporation, rendering the selection of individual underlying assets virtually impossible. Real estate security tokens hold immense potential to resolve these vulnerabilities inherent in legacy investment architectures. Property security tokens are transacted seamlessly via secondary trading platforms, thereby enhancing liquidity, enabling investors to cherry-pick specific underlying assets, and delivering unique non-monetary utility associated with the underlying property—distinctly differentiating themselves from legacy financial instruments.