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27th Oct 2021

Ownership of an Exquisite Car? Super Easy, if It Is Tokenized!

Classic cars or super sports cars (Supercars) along with real estate, precious metals, and stocks are considered a lucrative investment option. Year after year, entrepreneurs around the world invest in this asset. However, Supercars are a special asset that is, frankly speaking, quite expensive, only investors who have large funds can invest capital in them. For small or start-up businessmen, this kind of asset is simply unattainable.  

Now, with the development of blockchain-based asset tokenization, everything has changed. Presently, it is not necessary to have an impressive sum of at least six figures to invest in a classic automobile, it is enough to buy only a part of it for a modest cost.  

“It’s All about Tokens!” 

With the advancement of tokenization and Blockchain technologies, it became clear that these two tech trends have excellent potential, yet their combination is even more grandiose. Together they represent a force capable of reshaping the current world of finance and the global economy. They offer pioneering solutions to literally "move" assets from the real world to the digital one, preserving their value and all essential parameters. Furthermore, blockchain-based asset tokenization greatly simplifies the process of investing, eliminates middlemen and overall old-fashioned paperwork. 

Tokenized Classic Cars 

What is it, tokenization of Supercars? Basically, the supercar is digitized and this is done through the creation and issuance of tokens (digital units) on a blockchain (Ethereum, Cardano, and others) by dint of an STO (security token offering) launch.  

Below is a hypothetical scenario of tokenization of a $1,500,000 Ferrari collectible Supercar: 

A certain AutoAsset Group Ltd. buys high-quality cars with collectible value. These cars today are sold to 1 buyer only. With tokenization, the AutoAsset Group wants to purchase a Ferrari and sell to many hundreds of buyers using fractional sales via tokens. 

To set the best legal framework for this business model, the company will establish an AG in Liechtenstein, as Liechtenstein (and Switzerland) offers today one of the best legal frameworks for tokenization business models. A company formation in Liechtenstein and Switzerland can be supported by Clevver. And in detail, Clevver can also assist in:  

  • opening a bank account; 
  • preparation of the valuation report; 
  • programming of smart contracts on well-known blockchains (Ethereum and many others); 
  • working with a network of lawyers to establish a legal structure in the crypto-friendly country, like Liechtenstein or Switzerland;  
  • providing a white-label platform (with KYC / AML verification for investors) for further trading/exchange of tokens for FIAT money or other cryptocurrencies.  

Through tokenization, the Ferrari will be digitized into small parts and its $1,500,000 value will be transformed into 1,500,000 tokens (1 share = $1). To buyers wishing to purchase a piece of the tokenized Ferrari, those pieces will be available in packages x 5,000 tokens each. The smart contract includes a share certificate for the car, as well as an automatic annual incremental value payment (dividend). Further, each owner of the split asset participates in the development of the value and final sale price after 10 years.  

You can read more about the auto tokenization example on our website

Benefits of Tokenized Valuable Supercars 

Blockchain-based car tokenization has many advantages. Here are a few:  

  • Investing in luxury cars is an industry in which there is no common systematization: cars are valued according to different indicators, and the circle of investors who have access to this asset is objectively small due to the high capital required to purchase a car. Tokenization of vehicles will provide more transparent schemes of asset valuation and due to the possible fractional acquisition will expand the pool of potential investors by far. 
  • Due to the digitalization of the asset following the launch of auto-backed tokens and the use of blockchain, the possibility of errors is reduced to almost zero, as the human factor is almost completely eliminated. 
  • Selling /exchanging car tokens, unlike old-fashioned vehicle trading, can be done 24 hours a day, seven days a week, plus it is not tied to a location, which also erases the problem of investors being dispersed by region. 
  • Tokenization lowers the necessary capital threshold for investors wishing to participate in high-value automobile ownership. Because digital tokens can have a small face value, investors will be able to access this exclusive asset class with little capital. Once tokenized, even 1% of an expensive machine can be purchased. 
  • The tokenization of Supercars offers solutions to eliminate the role of financial intermediaries such as banks, insurers, notaries, etc. They will simply not be needed due to the composition of the necessary smart contact when issuing tokens. Smart contracts are existing in a blockchain computer code that ensures the automatic execution of agreements between users without interference. Because smart contracts operate in a blockchain environment, these algorithms cannot be changed once launched. 

Bottom Line 

Tokenization of the car is a time-consuming and extremely creative process since each tokenizing project is different and highly individual. Therefore, those who are interested in issuing tokens backed by an expensive car should seek help from specialists with sufficient knowledge, experience, and creative thinking. 

Clevver's new service, ClevverCrypto, offers structured and qualified assistance in the tokenization of various assets, including collectible vehicles. Check out an example project of Ferrari tokenization with Clevver on our website. You can contact our team to learn more about the new service and its functionality. 

DISCLOSURE NOTICE:  Any legal or tax advice in this communication (including any attachments) is for information purposes only and not intended to be used and cannot be used against Clevver or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. Clevver does not provide any legal advice itself. Clevver works together with a network of lawyers and tax advisors that provide all necessary individual legal advice.