The Moscow Stock Exchange is preparing to introduce a digital financial asset (DFA) for real estate assets in 2024 to make investing in the industry more accessible, local media reported, citing the exchange’s director of digital assets, Sergei Kharinov.

The new DFA is expected to lower the entry barrier for real estate investments, allowing a broader range of investors to participate in the industry.

The National Settlement Depository (NSD) will oversee the issuance of the DFAs that will be traded on the Moscow Stock Exchange. The NSD is one of 10 operators authorized by the Bank of Russia to oversee DFA issuance.

The other operators include traditional financial entities like Sberbank of Russia, Alfa Bank, Lighthouse, and St. Petersburg Exchange, as well as Web 3 companies like Blockchain Hub.

Digital Financial Assets

Unlike traditional financial instruments like stocks or bonds, DFAs are blockchain-based digital rights recorded as program code on a distributed ledger. Essentially, they are tokenized versions of a real-world asset — in this case, a real estate property — on a blockchain.

Although DFAs cannot be used as a means of payment under Russian law, they offer investors unique advantages — including the ability to divide the value of a security into multiple tokens and execute programmable transactions.

The issuance of real estate DFAs is expected to benefit both builders and investors. Builders can raise funds directly in addition to conventional bank financing, while investors gain access to real estate investments with a lower entry threshold.

According to the report, some developers have already shown interest in launching DFAs for real estate and are currently in talks with the Moscow Stock Exchange to clarify the process.

These financial instruments are anticipated to appeal to qualified and unqualified investors, allowing those with limited capital to participate in the real estate market.DFAs can act as a hedge against inflation, providing investors with the potential to save for future real estate purchases.

Russia has previously issued DFAs for real estate assets that offered a minimum return and additional profits linked to the rise in the cost of square meters in housing complexes. These were previously available to retail and unqualified investors.

However, the report said it is unclear whether retail investors will have the same level of access to real estate DFAs on the exchange this time.