Real estate tokenization makes people dream. On paper, it makes it possible to buy a fraction of a real estate asset just as easily as acquiring a token on a blockchain. A building, an apartment, a development project, or even rental income can thus be divided into digital units and offered to investors.
But in France, the legal reality is more nuanced. There is one essential point : tokenizing a real estate asset does not automatically mean that blockchain technology is replacing French real estate law. In practice, technology is advancing faster than legal framework. As a result, certain arrangements are possible, but they often involve indirect structures governed by financial law, corporate law, and real estate law.
What does real estate tokenization mean ?
Tokenization involves digitally representing an asset or a right on a blockchain. The token then becomes a kind of digital “token” that can circulate more easily than a traditional asset. In real estate, this can encompass several possibilities, such as representing an economic share in a project, shares in a company owning a property, or a right to receive future earnings.
This is where the confusion begins: a real estate token does not always grant direct ownership of a building. In many cases, it instead grants a right to a company, an income, or a real estate-backed financial instrument.
The potentiel of blockchain technology… and its current limitations
Blockchain can serve as a registry for certain securities or rights. However, it does not replace the notary or the land registry when it comes to legally transferring ownership of a real estate located in France. Under French real estate law, registering a real property on a blockchain is not currently sufficient to prove that an investor has become the owner. In short, while a transaction can be tokenized, it is not yet possible to freely transfer ownership of a property solely through this technology.
Direct vs. indirect tokenization: The key distinction
To understand the French legal framework, it is important to distinguish between two main models.
Direct tokenization is the most intuitive concept, in which each token represents a fraction of the property. However, the transfer of real estate ownership requires the involvement of a notary and a land registry. Blockchain technology does not yet officially assume these functions.
Indirect tokenization is today the most realistic model. For example, a simplified joint-stock company owns an investment property, and investors purchase tokens representing rights in the company. This structure is predominant because it fits into existing law. However, it should be noted that while the simplified joint-stock company is appropriate, the property management company presents certain constraints: The transfer of shares to a third party is subject to the approval of the partners (Article 1865 of the Civil Code), which hinders the free circulation of tokens without specific statutory amendments.
Why is this model so appealing?
Tokenization offers significant advantages. For issuers, it makes it easier to raise funds and automate certain operations through smart contracts. For investors, it lowers the minimum investment unit and provides access to high-quality assets with greater flow traceability. The concept is similar to a digital version of fractional real estate ownership.
The real legal issue: The classification of the token
In France, legal classification takes precedence over technological form. A token is not exempt from the law simply because it is recorded on a blockchain. There are generally three categories.
The token as a simple digital asset : If the token confers financial rights comparable to those of a stock, it falls under the regime governing financial tools. It is important to note that the concepts of “utility token” or “NFT” are practical categories without strict legal definitions: The Monetary and Financial Code distinguishes only between financial tools (Art. L. 211-1) and digital assets (Art. L. 54-10-1).
The token as a financial security : This is the most serious case. If the token entitles the holder to a return or dividends, it must comply with public offering rules and Financial Markets Authority oversight.
Furthermore, any intermediary involved in the chain must now comply with the status of Crypto-Asset Service Provider, governed since late 2024 by the European MiCA regulation.
Structures based on future income or royalties : Some projects attempt to promise a share of future earnings. However, the Financial Markets Authority has noted that these mechanisms may be considered as debt obligations. The regulator’s message is clear: The promise of a return linked to a real estate asset brings the transaction under the purview of financial law.
Major obstacles in France
Despite the utility, several obstacles remain. The barrier of traditional real estate law remains a key issue, as France relies on a centralized notarial system. Added to this, the risk of legal reclassification and saver protection requirements. Finally, liquidity is often overestimated: It depends on the existence of a truly deep secondary market; Otherwise, a token can be as difficult to resell as a traditional asset.
Conclusion
Real estate tokenization in France is an innovation hub subject to significant constraints. While the technological promise is real, rules as structuring as property rights or market regulation cannot be dematerialized with a single click.
Nor should the tax aspects be overlooked: depending on the nature of the rights, gains may depend on the capital gains applicable to real estate, securities, or the special regime for digital assets. A specialized legal consultation therefore remains essential. In the short term, tokenization will remain indirect, focusing on securities and claims rather than the building itself.
This article was written with the expertise of HASHTAG Lawyers.
