Choose the Asset Country
The asset country is the jurisdiction where the physical asset is located or legally registered. This choice is important because it determines the legal framework, taxation, ownership rules, and investor eligibility for tokenization. While the tokenization structure may be established elsewhere, the asset country still dictates key legal and financial obligations related to the underlying asset.
Key Considerations When Selecting an Asset Country
Legal Recognition
Does the country recognize tokenized ownership and allow digital securities?
Foreign Ownership Rules
Can international investors legally hold fractional ownership of the asset?
Regulatory Oversight
Do securities laws in the country affect how tokenized ownership is structured?
Taxation
How are capital gains, rental income, and transfers taxed in this jurisdiction?
Asset Transferability
Can ownership of the asset be freely transferred or are there restrictions?
The asset country’s legal and tax framework affects investor confidence, compliance requirements, and the overall feasibility of tokenization.
Ownership & Transferability in the Asset Country
Certain countries have restrictions on foreign ownership of real estate, businesses, or natural resources. If the tokenized asset falls under such regulations, additional structuring may be required to ensure legal ownership and investor rights.
Example: Some countries require government approval for foreign investors acquiring local property or company shares. If token holders are considered foreign investors, legal workarounds such as local trusts or nominee structures may be necessary.
Ownership Transferability Considerations:
Does the jurisdiction allow digital token-based ownership transfers?
Are there notary, land registry, or financial authority approvals required for asset sales?
Do local laws recognize fractionalized ownership of real-world assets?
Taxation in the Asset Country
The asset country’s tax policies impact both the issuer and investors. Key tax considerations include:
Capital Gains Tax – If the asset increases in value and is sold, does the country tax capital gains?
Withholding Tax – If the tokenized asset generates income (e.g., rental revenue), are taxes deducted before distribution?
Transaction Taxes – Are there stamp duties or VAT applied when transferring ownership of the asset?
Example: Some jurisdictions apply 0% capital gains tax on real estate sales, while others impose 30% or higher taxes on profits. If withholding taxes apply to investor distributions, the issuer must structure payouts accordingly.
Legal Risks and Compliance in the Asset Country
Issuers must ensure full legal compliance in the asset country to prevent regulatory conflicts. Key questions include:
Does the country allow the tokenization of physical assets?
Is there a risk that regulators will challenge the legitimacy of tokenized ownership?
Are there specific filing, disclosure, or approval requirements for tokenizing assets in this jurisdiction?
If the asset country does not provide legal clarity on tokenization, a legal opinion from local experts may be required before proceeding.
Conclusion: Selecting the Right Asset Country
If the asset country has clear and favorable laws on digital ownership, it simplifies tokenization and investor participation.
If legal or tax barriers exist, issuers must evaluate potential workarounds or alternative structures.
Understanding taxation, transferability, and ownership rules in the asset country ensures legal compliance and investor protection.
Choosing the right asset country ensures a legally sound foundation for tokenization and minimizes regulatory risks in the long term.
Last updated
Was this helpful?