Even with crypto winter, asset tokenization market continues to attract new interest

Despite the crypto winter experienced by bitcoin and its peers over the last few months, the token market, or cryptoassets —which, unlike cryptocurrencies, are backed by some real asset—has attracted growing interest from companies and investors.

On July 14, Itaú launched its own crypto-assets unit, which aims to tokenize fixed-income securities and shares traded on the market, in order to make alternatives that are currently restricted to high-net-worth investors more accessible.

In addition, in the second half of July, the educational sector platform Pravaler became the first company in the segment to issue a tokenized debenture in the local market, by raising around BRL 60 million in the operation.

“This is another step in the movement to bring the future to the present of the financial market”, says Juliano Cornacchia, CEO of Vórtx QR Tokenizadora, the company responsible for the tokenization operation of Pravaler’s debentures.

In the local market, there are houses that have been operating for a few years in the area of ​​tokenization of real assets, converting them into NFTs, an acronym that stands for Non-fungible Token (Non-fungible Token, in Portuguese), such as MB Tokens, an arm Bitcoin Market focused on the segment, and Hurst Capital.

These companies tokenize and offer investors in small fractions everything imaginable, as long as it has some real asset behind it that serves as ballast — from consortium shares to energy commercialization contracts, through works of art, musical royalties and even the sale of football stars like Neymar and Gabriel Barbosa.

These contracts of the most diverse natures are registered on the blockchain network and fractioned, to then be offered at affordable prices on cryptocurrency trading platforms to investors.

New digital fixed income

According to Vitor Delduque, director of new business at MB Tokens, in a simplified way, the token is nothing more than a digital contract registered on the blockchain network that represents the financial right over the asset that backs that contract.

“It’s a digital fraction of that real asset”, says Delduque, who until the end of last year was vice president of asset manager Pátria. He states that he chose to follow his path in the crypto universe because of the opportunities he sees in the segment for the next few years.

Among the tokens traded on the platform, the director mentions shares in consortia acquired from financial institutions such as Santander and Banrisul, in which the investor is entitled to receive payments from that fraction of a given consortium, as well as accounts receivable from companies in the retail sector, in which MB Tokens acquires the portfolio of credits owed by customers at a discount, tokenizes and sells it to customers.

The company has moved around BRL 180 million in tokens since it started activities in 2019.

The rate of return varies according to the level of risk and maturity of the operations, but, according to Delduque, it is common to find fixed-rate yields of around 18% per year in trades carried out by MB Tokens, or which pay a fixed rate. around 12% per year, in addition to the variation of the IPCA during the term of the contract.

These are operations that can be characterized as a kind of “digital fixed income”, in which the investor already knows at the time of purchase how much income he will have with that investment, says the director, adding that the minimum investments are usually R$ 100 on the platform.

“It’s winter for cryptocurrencies, but summer for cryptoassets”, says Delduque, who says he has noticed a migration of investors hitherto more focused on cryptocurrencies to the digital market backed by real assets, which, precisely because they have real assets behind the operation, offer greater security than cryptocurrencies, he argues.

He also says that there are also crypto-assets with characteristics that are more similar to the dynamics of shares traded on the Stock Exchange.

This is the case of tokens that are backed by the right to receive amounts arising from the sale of professional football players — under FIFA rules, when a player is traded on the market, the club that played in his training as an athlete between 12 and 12 23 years old is entitled to a share of 5% of the amount handled.

In October of last year, Mercado Bitcoin launched the “Token da Vila” in partnership with Santos.

The digital asset is backed by the right that the Vila Belmiro club has over 12 players it has trained in its basic categories. Among the players in the group are stars such as forwards Neymar Jr., from PSG, Gabriel Barbosa, from Flamengo, and Rodrygo, from Real Madrid.

Around 600,000 tokens were issued, totaling an offer of BRL 30 million to the market.

In this case, the yield to which the token holder will be entitled will depend, first, on whether the players will actually be traded in the future, and, second, for what value, explains Delduque.

In May, investors in the Santos token received the first payment for the asset, corresponding to the transaction involving striker Yuri Alberto, sold by Internacional to Zenit, from Russia. The total resources distributed proportionally to the token holders amounted to approximately BRL 1.6 million.

Music royalty tokens and artwork

On the Hurst Capital tokenization platform, investors can invest in cryptoassets that range from court orders and lawsuits, through music royalties and even works of art.

Tokens backed by musical royalties from singer Toquinho (“Aquarela”, “Tarde em Itapoã”, “A Tonga da Mironga do Kabulet”ê, “O Caderno”) and Paulo Ricardo (“Rádio Pirata”, “Olhar 43”, Big Brother Brasil), have already been marketed by Hurst’s platform, with minimum investments starting from R$ 10 thousand.

“The option of negotiating your receivables is something healthy and heats up business. The more options we have in life, the better. This stirs up the market and encourages the composer”, said Toquinho in a statement in which Hurst announced the operation in May this year.

Estimated income from music royalties ranges from 12% to 16% per year, with the return coming from playing the songs on radio and streaming platforms, and the subsequent resale of copyrights at the end of the investment term, which usually vary from 36 to 78 months.

Royalties from forró, funk, axé songs and even TikTok hits have also been traded via tokens through Hurst.

In addition to the music sector, works of art, such as those by the plastic artist Abraham Palatnik, have also been traded on the platform, with remuneration rates that reached the mark of 27% per year.

Hurst’s own initial estimates indicated a profitability of around 17% with the investment in the three tokenized works of Palatnik, who died in 2020 victim of Covid-19, with a period of 24 months for the sale of the works on the market in order to achieve the projected return.

Given the heated demand in the art market, however, the term was reduced by half, with the closing of the operation in June 2022, about 12 months after the offer, and with a yield 10 percentage points above the initially estimated.

“Tokenization serves to facilitate the distribution of investments originated by Hurst’s partners”, says Arthur Farache, CEO of Hurst. “Tokenization is a reality that will increasingly be part of the lives of all citizens.”

He adds that it is planned to start trading via tokens of traditional financial assets a little further on, such as debentures and shares issued by companies that want to explore the opportunities of the digital market. Since the beginning of operations, in 2019, Hurst has moved around BRL 1 billion with the trading of cryptoassets.