The Secondary Market for Security Tokens From a Real Estate Perspective

Tokenization holds great potential — especially in the real estate sector. Any asset can be replicated in digital form so that transactions can be executed at low cost, with no minimum investments, from anywhere in the world and with 24/7 market access. However, a liquid secondary market must exist for these benefits to fully unfold. At present, these buyer markets have not yet emerged. The challenge is no longer infrastructure, but the shortage of liquidity in the securities token markets, which is primarily due to a lack of trust and regulation that is still unclear. For a healthy growth and adoption, the market requires an ecosystem with regulated exchanges, professional custody providers as well as operations in jurisdictions with legal certainty. Investor confidence can and must be won with an institutional investment product that is on par with traditional investment options. — Authors: Ekaterina Bozoukova, Philipp Sandner, Thomas Faber

Real estate traditionally yields attractive returns. However, due to the high values of the assets involved, there are high market entry barriers. In addition, traditional securities trading generally involves a high administrative overhead with multiple intermediaries and a costly and inefficient process to track trading activity. For more illiquid securities, these costs tend to be higher — take for example real estate transactions. Lawyers, brokers, and bankers, all parties involved demand their piece of the cake, often taking months to close a deal. Due to these tremendous costs, issuers must adjust parameters that restrict liquidity, for example minimum investment amounts. Additionally, due to lower liquidity, sellers must sell their assets at a discount, not being able to realize the true value of the underlying asset. Today, a new and better way to settle transactions has emerged: tokenization.

The idea behind it is as simple as it is fascinating: turning illiquid into liquid assets while increasing financial inclusion at the same time. With the help of distributed ledger technology (DLT), issuers may replicate any asset in digital form, dividing it into almost any number of parts, selling it in a primary offering, and then listing the token for secondary trading at an exchange. Everyone could buy and sell securities, at low transaction costs, with no minimum investments, and everywhere in the world.

This is how it is often presented, but does it hold in practice? Who are the players in the secondary market for security tokens and how liquid is it in fact? How will the market develop in the near future?

How to invest in security tokens

Before trading of any kind and the distribution of security token to potential investors becomes possible, the token has to be issued as part of a security token offering (STO). Issuers typically utilize security token platforms that ease various processes with respect to the emission and provide investor access. In order for investors to access STOs, the issuance of the token has to be in line with current regulations.

Once the token is listed for a primary market sale, investors may purchase it directly from the issuer. However, an important precondition for most investors is an existing liquid secondary market. Anyone who buys a security token, needs to know what a possible exit might look like.

Typically, the secondary market involves investors who trade previously issued security tokens, without the involvement of the issuing companies. As stated above, a liquid secondary market plays an important role for the ecosystem as it provides an important exit opportunity for investors.

In the following, we will examine to what extent such a secondary market exists for security tokens and assess the liquidity situation.

Current landscape of the secondary market for security tokens

The first compliant, peer-to-peer security token transfer on a public blockchain, took place in November of 2018. Since then, the infrastructure has grown rapidly and with it fresh capital to develop technologies, platforms and markets. However, despite the recent dynamics, security tokens are still a developing asset class. With over two years of history to the industry, we will map the current landscape, track the most important marketplaces and assess the liquidity situation in the market.

According to the market report of the Security Token Group, the total security token market capitalization has reached more than $657 million in March 2021, while the top three marketplaces and exchanges alone account for about 96% of the market (see Figure 1):

  1. tZERO ATS — Market Cap: $450,285,305.80
  2. OpenFinance Network ATS — Market Cap: $100,700,204.40
  3. MERJ Exchange — Market Cap: $37,430,431.90
Figure 1: Security Token Market Cap Share by Marketplace (Source: Own Analysis)

The ‘others’ category includes market players such as ISTOX and Nxchange but also decentralized exchanges such as Uniswap. The market has developed rapidly. In total, the Security Market Group lists more than 78 security token exchanges for digital securities with many still in development. It has to be noted that most exchanges are either asset agnostic or focus on equity securities with only one exchange focusing on real estate only (Atlant).

Looking at the global distribution of the token platforms, North America and Europe account for 58% of all platforms. The USA comes first with 25 security token platforms (32%) followed by the European Union with 20 platforms (26%) (see figure 2). Within the EU, Malta leads the way with 6 platforms. But again, many of these projects are in development or in an experimental stage. That’s why the three biggest players divide almost the entire market among themselves — with just a dozen security tokens. This already gives us a small hint about the liquidity situation in the market.

Figure 2: Number Share of Security Token Platforms by Jurisdiction (Source: Own Analysis)

The real estate perspective

Now that we have examined the numbers in the general STO market, we will narrow it down to real estate. According to estimates by forkast, the total value of tokenized real estate today is about $128 million, representing only 0.0013% of the professionally managed global real estate investment market of $9.6 trillion (MSCI Market Size Report). However, real estate takes a significant share of the tokenization market, making up almost 20% of the total security token market capitalization. Arguably the most prominent example of real estate tokenization is the Aspen Coin — a digital security associated with the St. Regis Aspen Resort — traded on tZero. In March 2021, its market capitalization reached $22,500,000, thereby representing almost 18% of the total tokenized real estate market. Although a substantial number of real estate tokenization platforms — such as RTX21, Finexity, Exporo or FND — have emerged, as of today none of the listed real estate projects have entered a secondary market. This gives us a good reason to take a closer look at the liquidity situation in the secondary security token market.

Liquidity risk

Typically, liquidity is linked to liquidity risk, i.e. the discount that the seller must accept in order to liquidate his asset. This so-called liquidity risk is naturally high in private markets, where demand or accessibility is limited. But it is also high when the buyer market has not yet developed. This we can observe when we look at the trade volume on STO exchanges as analyzed by Security Token Market. Total trading volume in March 2021 was $7,187,959.21, with 96% of that volume accounted for by tZERO, and most of that 96% again accounted for by just two security tokens. OpenFinance Network ATS and Merj Exchange follow far behind with March 2021 trading volumes of $2,765 and $11,800 respectively.

Looking at the secondary market for real estate tokens only, Security Token Market indicates a total trading volume of $77,764 in March 2021 with the Aspen Coin (mentioned above) alone accounting for $64,365 and thus 83% of the market volume. Although the data must be subjected to a healthy skepticism and no completeness can be guaranteed due to the complexity, fragmentation and the young age of the market, one can nevertheless conclude that the market is still in its infancy in terms of liquidity.

Hence, it is important to note that the challenge today is no longer the infrastructure. The lack of liquidity in security token markets stems primarily from a lack of trust or an still unclear regulation. Investors trust what they know and stick to it, so buyer markets for tokens have yet to develop.

Although liquidity is somewhat correlating with market maturity, this only holds to a certain degree. Liquidity doesn’t just happen, you have to carefully craft it. Since trust is the driving force, issuers must respond to the security concerns of potential investors. The real challenge is to create a trusted investment ecosystem — with regulated exchanges, professional custody providers, and operations in jurisdictions with legal certainty. Winning the trust of investors can only be achieved with an institutional-grade investment product that is in no way inferior to traditional forms of investment.


Tokenization of securities brings along significant benefits, including cost reduction, the ease of transferring the asset peer-to-peer and creating 24/7 market access. Also, interaction with third parties such as custodians, brokers and exchanges is simplified, thus increasing the accessibility of assets for buyers. Certainly in the future there will be syndicates, OTC desks, and security token exchanges that have been successful in creating a liquid buyer’s market for security tokens. As of today, these buyer markets have not yet formed. It will take a continued effort by the industry, governments and the will of the issuers themselves to drive demand for their assets and educate the market.


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Ekaterina Bozoukova is Chief of Operations at RTX21 since 2018 and has already gathered experience in two other startups she founded — one healthy system gastronomy and one real estate brokerage company. Before her entrepreneurial journey began in 2014, she worked at the Investment Banking Division of Deutsche Bank in Frankfurt for four years dealing with large cap mergers and acquisitions as well as capital market transactions. With years of entrepreneurial, corporate strategy as well as corporate finance experience, Ekaterina is one of the driving forces behind RTX21 becoming a one stop shop platform for the real estate investment industry. You can contact Ekaterina via mail ( and LinkedIn.

Prof. Dr. Philipp Sandner has founded the Frankfurt School Blockchain Center (FSBC). From 2018 to 2021, he was ranked among the “top 30” economists by the Frankfurter Allgemeine Zeitung (FAZ), a major newspaper in Germany. He has been a member of the FinTech Council and the Digital Finance Forum of the Federal Ministry of Finance in Germany. He is also on the Board of Directors of FiveT Fintech Fund, 21e6 Capital and Blockchain Founders Group — companies active in venture capital financing for blockchain startups and crypto asset investment management. The expertise of Prof. Sandner includes crypto assets such as Bitcoin and Ethereum, decentralized finance (DeFi), the digital euro, tokenization of assets, and digital identity. You can contact him via mail ( via LinkedIn or follow him on Twitter (@philippsandner).

Thomas Faber is a research fellow at the Frankfurt School Blockchain Center and a project manager at the International Token Standardization Association (ITSA). His areas of interest include distributed ledger technology (DLT), security tokens (STOs), crypto-assets as well as blockchain ethics and blockchain-related sustainability issues. Mr. Faber holds a B.Sc. degree in Management, Philosophy & Economics as well as a M.Sc. degree in Management with a focus on digital business models from the Frankfurt School of Finance & Management. You can contact him via email ( and LinkedIn.



Professor | Lecturer | Author | Investor | Frankfurt School Blockchain Center

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Philipp Sandner

Professor | Lecturer | Author | Investor | Frankfurt School Blockchain Center