SJD / Dr. iuris Antonio Tejeda Encinas President Comite Euro Americano de Derecho Digital -CEA Digital Law | CEO Meta Channel Corporation
The problem is not the technology, it is the language
For years, the internet has been saturated with platforms and projects claiming to “tokenize real estate”, promising fractional ownership, instant liquidity and global access, as if the mere holding of a token were equivalent to ownership of a fraction of a piece of real property with full effects against third parties. That narrative, repeated throughout the crypto and real estate ecosystem, conceals a serious conceptual error: it confuses the technological support of a transaction with its legal validity, and that mismatch is generating ill-informed investments, invalid structures and, in more than a few cases, outright fraud.
The underlying problem is not that blockchain technology is ineffective. Blockchain works for what it was designed to do: to attest that a piece of data was written at a given moment and has not been altered. But that technical certification does not create rights in rem, does not transfer ownership and does not confer enforceability erga omnes. In Spain, real estate ownership is only validly transferred by means of a public deed and, as against third parties, with registration in the Land Registry; a token, by itself, produces no real transfer effects and cannot replace those requirements, because Article 1280 of the Civil Code requires a public deed for the transfer of rights in rem over real property and the Mortgage Act reserves to the Registry the public faith function and the protection of the third party acting in good faith.
What is indeed possible, and it should be said without ambiguity, is to legally structure economic, credit or corporate rights linked to a property, always within the current civil, mortgage and financial framework. But in that case one is not tokenizing the property, but rather the legal structure surrounding it: shares in a vehicle company, credit rights over income flows, participating loans, real estate bonds or financial instruments subject to MiFID II or MiCA. That distinction is not an academic nuance; it is the frontier between what is legally possible and what is narratively profitable.
What really happens when someone says they tokenize a property
When a platform announces that it “tokenizes real estate”, in practice it is usually doing one of these three things, none of which amounts to tokenizing real property in the technical-registry sense.
First structure: owner vehicle company and equity tokens. The most common scheme is the creation of a special purpose vehicle (SPV) that appears as the owner of the property in the Land Registry, while investors acquire tokens representing shares, stock or economic rights linked to that company. The property remains registered in the name of the SPV; the tokens are, in legal terms, equity or quasi-equity. Platforms such as RealT have popularized this model in the United States: each property is channeled through an LLC, the tokens represent shares and the rents are distributed in cryptocurrency, but the registered owner of the property is still the company, not the diffuse set of token-holders. * the citations are given as typological examples, not as a judgment of legality or legitimacy.
From the perspective of real estate law, the investor is not the owner of the property: he is a shareholder or participant in a legal person that is. If the company is wound up, goes bankrupt or is subject to a seizure, his position is that of a shareholder or, at most, a residual creditor. Blockchain does not alter that basic fact.
Second structure: tokenization of credit rights and economic flows. Another variant is the tokenization of credit rights linked to the property: participating loans, bonds, rental income or revenue sharing schemes. In this model, the token does not represent ownership or a corporate shareholding, but a credit: the right to collect a share of the rents or of the future capital gain. Reental, in its operations in Spain, is a paradigmatic example: investors acquire tokens representing participating loans to companies that operate real estate, receiving variable interest depending on the rents and any eventual sale, but without acquiring any right in rem over the assets.
The framework is entirely civil and financial in nature: these are credits against a company or vehicle, possibly backed by guarantees, but the Land Registry continues to show the issuing company or a third party as the owner. The token holder is a creditor, not an owner; and if there is a conflict with a third party who registers a right in rem, the third party will prevail by effect of the Registry’s public faith.
Third structure: economic fractionalization disguised as digital ownership. The most problematic variant is the one in which a purely economic fractionalization is marketed using the language of “ownership”, “shares of the property” or “fractional ownership”, when in reality what exists is a private contract with no effect in rem against third parties and no reflection whatsoever in the Registry. In these cases, the investor buys a token that embodies a promise of participation in rents or capital gains, but acquires no right in rem and no title that can be asserted against seizures, mortgages or subsequently registered transfers.
This third group is the terrain where it is easiest for marketing to turn into a scam. The investor believes he is buying “a share of the apartment”, but legally he only holds a contingent credit against an issuing entity, usually based in another jurisdiction and, often, with scant regulatory supervision. Blockchain adds no legal protection: it simply records the existence of a token that no public registry recognizes as a title.
Why the token cannot be a title to real property
The reason why the token cannot today become an autonomous title of real estate ownership has nothing to do with the technical capabilities of blockchain and everything to do with the structure of real estate law as a matter of public policy.
In the Spanish system, a contract for the sale of real property may be formalized in a private document, but the transfer of ownership with full effects requires a public deed and, for its enforceability against third parties, registration in the Land Registry. Article 1280 of the Civil Code requires a public deed for the transfer of rights in rem over real property, Article 609 CC combines title and mode, and the public deed may serve as instrumental traditio pursuant to Article 1462 CC. In turn, the Mortgage Act configures the Registry as the axis of the system: registration is not constitutive in every case, but it is decisive for the protection of the third party in good faith and for lending stability to legal transactions.
Blockchain cannot perform these functions because it lacks the features defined by the legal system: there is no public authority responsible for the entry, no prior legality control, no registry qualification, no system of priority or public faith, nor an institutionalized mechanism for the rectification of errors and nullities. What the technology offers is proof of integrity, not legal legitimation. Recording on a blockchain that A “transfers” a token to B does not make B the registered owner of the property that token supposedly represents; it makes him, at best, the holder of an obligational right against the issuer of the scheme.
This logic is not exclusive to Spain. It is part of an institutional design that no reasonably serious State has abandoned, not even those that have been experimenting with blockchain in public registries for years.
Comparative law does not refute it, it confirms it
In comparative terms, the picture is uniform: no country has turned the token into an autonomous title of real estate ownership with constitutive effect; at most, blockchain has been put at the service of the registry, not in its place.
In Sweden, the Lantmäteriet project tested the digitalization of the conveyancing process on blockchain, with the aim of reducing time and costs, but the transfer’s effectiveness still depended on the state registry: the technology was used as infrastructure for the procedure, not as a substitute for the registry system or as an autonomous source of rights in rem.
In Georgia, property titles are anchored to the blockchain to reinforce integrity and traceability, through projects initially developed with Bitfury and, more recently, with agreements to explore tokenization on Hedera, but the constitutive authority remains the National Agency of Public Registry; there is no regime in which the mere transfer of a token, outside the registry, produces erga omnes effects on land ownership.
In Dubai, the Dubai Land Department has launched “property tokens” and fractional investment platforms in collaboration with private companies, using blockchain as support, but valid ownership is still that recognized by the Emirati land registry: the token operates as an authorized reflection of the registry entry and as a financial vehicle, not as an autonomous title displacing the registry.
Far from refuting the thesis, comparative law reinforces it. The global movement is heading in the direction of registering better, not of dispensing with the registry.
The structural confusion: digital wills, smart contracts and DAOs
The fiction of “blockchain-native ownership” of real estate repeats a pattern already seen in other fields: the “digital will”, the “smart contracts that replace the notary” or the “DAOs owning real estate” without recognized legal personality. In all of them, technological enthusiasm tends to ignore that there are matters that the legal system does not leave to the disposal of private autonomy or mere technique, even when the latter works impeccably. You can read my latest article on the digital will here
In all these cases, the underlying error is the same: confusing the technological support of the will with the legal validity of the will. Succession law, real estate law and the regime of rights in rem are not a problem of lack of technology; they are instruments of public policy aimed at protecting third parties, ensuring the stability of legal transactions and channeling private autonomy through controlled forms.
When the limits are ignored, there is no innovation: there is an exit from the Law
Real estate tokenization can bring efficiency, transparency and new forms of access to investment, but only if it is built on a correct legal architecture. When blockchain is presented as a substitute for the Land Registry, when it is promised that a token “is” the ownership of the property without a public deed or registration, when fractions are sold of something that the legal system does not recognize as a right in rem, there is no innovation: there is an exit from the legal system and massive exposure to risk.
In Spain, as in the rest of the advanced jurisdictions, the underlying message is simple and should be stated bluntly: without the Registry there is no real estate ownership, and without ownership there is no transfer. Technology can improve the channel, never suppress it. And it is on that boundary, rather than in the uncritical celebration of “everything can be tokenized”, that the difference is played out between an ecosystem that innovates within the Law and a market that lives off conceptual fictions that will end up being resolved in the courts.
* the citations are given as typological examples, not as a judgment of legality or legitimacy.
