The Token That Vanishes from the Estate Inventory: When Real Estate Tokenization Confuses Innovation with Fragile Usufruct

 There is an old saying: "When a clever person meets a naive one, a deal is born." In the tokenization era, this meeting no longer happens on the street corner. It happens through a link, inside a beautifully packaged narrative, within a contract that few read, and written in a code that almost no one can audit.

Therefore, before asking which legal loophole protects an operation, we must ask: what risk architecture has been hidden behind the discourse of innovation?

Real Estate Tokenization is Inevitable

Real estate will enter the blockchain. Real estate credit will enter the blockchain. The land registry title (matrícula), rental cash flows, receivables, fractional economic shares, guarantees, and asset traceability will all interface with digital systems. This is no longer a matter of "if"; it is a matter of "how."

The problem begins when the market tries to sell as a revolution something that, legally speaking, might still be nothing more than an elegant workaround.

I have studied, structured, and participated in projects linked to blockchain, asset tokenization, carbon credits, commodities, and traceability. I have the platform, the team, and the technical capacity to launch tokenizable products into the market. However, there is a brutal difference between being able to launch a token and being able to launch a product that is safe, auditable, regulatory-defensible, and fair to all parties.

And that is exactly where the controversy lies.

The Brazilian Securities and Exchange Commission (CVM) already provides important guidance on cryptoassets and securities. CVM Guidance Opinion 40 consolidated the understanding that tokenization, by itself, does not require prior approval from the CVM. However, issuers and public offerings of tokens that constitute securities must respect the applicable regulations. The CVM also affirms that its jurisdiction falls upon cryptoassets considered securities, such as tokens representing traditional securities, tokenized receivables certificates, or publicly offered collective investment contracts.

Therefore, the serious discussion is not "Is tokenization allowed or not?" It is allowed. The real question is: what exactly is being tokenized?

• Property?

• Receivables?

• Credit?

• Usufruct?

• Obligatory rights?

• A promise of yield?

• A collective investment contract?

Each of these answers completely alters the risk profile.

The Case of Tokenized Usufruct

Recently, while analyzing a real estate token structure linked to a residential property, the legal thesis did not look like full ownership, nor a traditional fractional share registered as domain ownership. What appeared was a usufruct token: a fractional, minimal right to use and economically enjoy a specific property.

At first glance, it looks sophisticated. The investor looks at it and thinks: "I own a little piece of real estate."

But it doesn't quite work that way.

In Brazilian law, usufruct is not full ownership. Usufruct is the right to use and enjoy a property owned by someone else (coisa alheia). The person holding the usufruct can receive fruits, such as rent, depending on the structure. However, the bare ownership (nua-propriedade) remains with another titleholder. Furthermore, the Brazilian Civil Code is very clear: you cannot transfer usufruct via sale; only the exercise of usufruct can be ceded, whether for free or for profit.

This brings up an uncomfortable, simple question:

If you die, investor, does the token go to your heirs, or does it disappear along with the usufruct?

The Civil Code stipulates that usufruct is extinguished—and its registration cancelled at the Real Estate Registry—upon the renunciation or death of the usufructuary, among other scenarios. For legal entities, there are also specific rules regarding extinction or time limitations. This means that, depending on how the structure was set up, the asset the buyer believes to be "patrimonial property" may not behave like transmissible patrimony.

This is the central point: a token can live forever on the blockchain, but the legal right it represents can die tomorrow.

Blockchain Doesn't Fix Weak Law

The blockchain records data. It does not, by itself, transform a fragile legal right into a strong one.

If a token represents a real right (direito real) properly recorded on the property deed (matrícula), we are having one conversation. If it represents only a private contract, a promise, a digital mirror, or an unrecorded economic right, we are having a completely different one. This difference is the chasm between asset security and commercial narrative.

The CVM itself, when dealing with tokens of receivables and fixed income, made it clear that certain tokens can be characterized as securities and that this characterization does not depend on a prior pronouncement from the agency; private agents must assess whether capital markets regulations apply to the distributed assets. The CVM's technical body has also reinforced that its official letters on receivables tokens were meant for guidance, not formal regulation.

This is a heavy sentence for anyone structuring a product: guidance is not an absolute safe harbor.

It helps. It signals. It reduces the darkness. But it does not replace a robust legal model complete with deed registration, governance, custodians, underlying assets, valuations, liquidity, duty of information, exit rules, and clear protocols in case of death, default, succession, bankruptcy, judicial foreclosure, or disputes between parties.

The Regulatory Gap That Seduces the Market

Every new market begins by looking for loopholes.

It was like that with fractional ownership (multipropriedade). It was like that with developments, securitization, crowdfunding, and financial structuring. First, the market invents. Then, the law catches up. Next, the regulator tries to organize it. Finally, the investor discovers that some structures were true innovation, while others were just poorly explained risks.

Today, many are trying to find a way to tokenize real estate assets without triggering a securities characterization, without looking like securitization, without looking like a public offering, and without looking like a collective investment contract.

The question is: if all the effort is spent trying not to look like what it economically is, lies the problem within the technology or the packaging?

When someone buys a tiny fraction of usufruct expecting rental income managed by a third party—with an economic expectation derived from someone else's administration—we are very close to the question that matters most to the regulator:

• Is there a collective investment?

• Is there an expectation of profit?

• Is there significant effort by a third party?

• Is there a public offering?

Brazilian Law 6,385 includes in the definition of securities any publicly offered collective investment contracts that generate rights of partnership, association, or remuneration, including when the returns come from the efforts of the entrepreneur or third parties. The CVM also utilizes criteria inspired by the Howey Test to identify these contracts.

Therefore, the issue is not the name given to the token. It is its economic function. Calling it "digital usufruct" does not magically eliminate a securities analysis. Calling it "digital property" does not solve the registry problem on its own. Calling it a "real estate fraction" does not automatically make it a fractional share of full ownership.

What I Could Do—And Why I Haven’t Yet

I could launch a blockchain product tomorrow. I could tokenize property. I could tokenize carbon credits. I could tokenize commodities. I could build a beautiful narrative, set up a sleek dashboard, digital wallets, smart contracts, QR codes, asset backing, and a commercial campaign.

But there is a line that separates the entrepreneur from the adventurer.

In medical and industrial cannabis projects, for example, even with a strong scientific structure, partnerships with institutions like Embrapa, research, and capital appetite, the backstage legalities must stand entirely on their own feet before making aggressive promises. It is not enough to "have a path." The path must withstand audits, banks, investors, regulators, contracts, delivery, and crises.

With carbon credits, the logic is similar. The market is massive, but it still suffers from an excess of narrative, low standardization, poor liquidity in various modalities, and a lack of reliable pricing. Tokenizing a carbon credit is technically easy. But tokenizing something the market cannot yet price securely might just mean transforming uncertainty into a pretty digital asset.

In real estate, the risk is even more sensitive because properties interface with deeds, possession, ownership, usufruct, real guarantees, succession, property taxes (IPTU), foreclosures, financing, notary offices, valuations, and secondary markets.

And I do not sign my name to a product that the average buyer cannot understand.

Investors Don't Buy Blockchain; They Buy Security

The investor does not care whether the token is on Network A, B, or C. They want to know:

• Is the right registered on the property deed (matrícula)?

• What happens if the management company goes bankrupt?

• What happens if the property is sold?

• What happens if the usufructuary dies?

• Can the token be inherited?

• Is there a real secondary market?

• Who values the property?

• Who audits the rent?

• Who pays property taxes, condo fees, and ordinary expenses?

• Who answers if the contract is legally challenged?

The Brazilian Civil Code assigns ordinary conservation expenses and property-related taxes to the usufructuary. In a fraction of 0.002%, this may seem economically irrelevant, but it is extremely relevant as a legal concept. It shows that the buyer might be receiving not just a "right to returns," but a legal position that is far too complex for the size of the benefit.

If the monthly rent of a property is R$ 2,300.00, a 0.002% fraction represents cents per month. That is not an investment. It is an experiment. It is an educational ticket to watch a thesis being born.

And there is absolutely nothing wrong with experiments—as long as they are sold as experiments. The problem is when the experiment puts on a suit and pretends to be a wealth-building investment.

CVM, the Central Bank, and the Gray Area

Brazil has advanced. We are not in a lawless land. Law 14,478 created the Virtual Assets Regulatory Framework, and Decree 11,563 assigned competencies over virtual asset service providers to the Central Bank. The Central Bank published Resolution BCB 520, disciplining the constitution, operation, and provision of services by virtual asset service providers.

But real estate tokenization is not just a cryptoasset topic. It is also a matter of registry law, capital markets, civil law, succession, real estate appraisal, governance, investor protection, and advertising compliance.

The CVM's regulatory agenda indicates significant movements, including new rules to replace Resolution CVM 88, the modernization of fund rules, and a focus on tokenization alongside the redesign of classical intermediary roles in the capital markets.

In other words: the regulator is watching. The market is moving. But the bridge is not yet fully built.

The Question Nobody Wants to Ask

The biggest question facing Brazilian real estate tokenization is not technological. The question is:

Are we democratizing access to wealth, or are we pulverizing fragile rights among retail buyers who lack the scale to defend themselves?

An institutional investor can hire lawyers, demand deeds, request legal opinions, audit contracts, negotiate buyback clauses, lock down guarantees, analyze succession risks, and challenge regulatory framing. The retail buyer cannot.

They see a beautiful interface, a token in their wallet, the word "real estate," and a promise to participate in a market previously restricted to the wealthy. Yet, often, what reaches them is not property ownership. It is a sliver of an economic right, entirely dependent on private contracts, management, legal interpretation, and operational good faith.

This needs to be said out loud.

Good Tokenization Will Win; Weak Tokenization Will Turn Into Litigation

I am an advocate for tokenization. But precisely because I defend the technology, I am against its trivialization. Serious real estate tokenization must be built on minimum structural pillars:

• A clear legal link or registration on the property deed (matrícula);

• Precise identification of the exact right being represented;

• Technically defensible real estate valuation;

• Strong corporate governance from the manager;

• Clear rules for succession and inheritance;

• Defined buyback or exit rules;

• Audited revenues and expenses;

• Transparent protocols for vacancy, defaults, and asset sales;

• Complete clarity regarding securities characterization;

• Accessible, clear language for the buyer.

Without this, we are not looking at asset democratization. We are looking at a difficult contract wrapped in easy technology.

Tokenization is revolutionary, beneficial, and necessary. It can democratize access to assets, lower transaction costs, expand liquidity, improve traceability, and unlock new forms of wealth organization. The doubt does not lie within the technology. The doubt lies within the cleverness of those operating it.

Innovation organizes risk; cleverness merely changes the packaging of risk.

Conclusion: The Future Cannot Be Built on Fine Print

Tokenization will transform the real estate market. I believe this deeply. It will reduce friction, expand access, improve traceability, create liquidity, integrate guarantees, accelerate credit, and allow for new forms of economic ownership.

But the future of this market cannot be born out of a confusion between usufruct and property ownership. It cannot rise from the idea that blockchain fixes what notary offices, the Civil Code, the CVM, the Central Bank, and investors do not yet fully understand.

It cannot be built on a token that vanishes from the estate inventory during probate.

Real estate innovation must be bold, but it cannot be irresponsible. It must be digital, but it must also be registrable. It must seek liquidity, but it cannot fake it. It must be accessible, but it cannot hide legal complexity from the small buyer.

The token is just the packaging. What matters is the legal right inside it.

In the real estate market, anyone who does not understand the difference between usufruct, full property, possession, receivables, and securities is not innovating. They are simply placing blockchain where there should be responsibility.

Before tokenizing a property, the market needs to answer one simple question: is the buyer walking away with actual wealth, or just a beautifully presented digital promise?