Abstract

This chapter examines the convergence of digital assets and real estate transactions. It analyzes two models that have emerged, both purporting to revolutionize property transfers through distributed ledger technology. Model 1 proposes direct ownership of real property through digital assets, claiming that tokens can embody and transfer title to real estate. The analysis demonstrates that this approach encounters fundamental legal obstacles. Property law’s statute of frauds, deed requirements, and title assurance systems create formidable barriers. Concurrently, UCC Article 12 explicitly excludes real property interests from its tokenization framework. Although electronic transaction statutes theoretically permit digital assets to function as electronic deeds, the chapter reveals that such instruments cannot operate as bearer instruments of title as market participants envision. Each transfer would require metadata modifications identifying new grantors and grantees, while recording system incompatibilities create substantial implementation obstacles that negate purported efficiencies. Model 2 employs indirect ownership through tokens representing equity interests in entities that hold real property. While legally viable, this structure transforms financing arrangements from protective mortgage law to Article 9’s commercial enforcement regime. This shift eliminates judicial oversight, redemption periods, and consumer safeguards for residential borrowers while exposing lenders to competing property liens and risks of equitable mortgage recharacterization. The chapter concludes that both models generate cascading legal complications that overwhelm any theoretical benefits.