From Bricks to Blocks: Designing a Framework for the Tokenization of Real Estate for DeFi

Decentralized Finance (DeFi) promises to lay ground for a more open financial system enabled by blockchain technology. Therein, stablecoins have recently gained momentum as regulated and trusted payment instruments, increasingly adopted for cross-border transactions and supported by initiatives such as the GENIUS Act in the U.S. and the European MiCAR framework. While stablecoins create the foundation of trust for linking DeFi with traditional finance, the ecosystem still depends heavily on cryptocurrency markets due to limited real-world asset integration. Existing research largely focuses on traditional securities and tradable assets, but scant attention has been paid to one of the world’s largest asset classes, real estate. To address this gap, we propose a framework for the tokenization of real estate for integration into the DeFi ecosystem. Using the Design Science Research (DSR) approach, we construct and evaluate our framework through expert interviews and smart contract simulations. The simulations validate technical feasibility and demonstrate efficiency gains, with batch transfers reducing transaction costs for portfolio purchases. Building on these evaluations, we derive design principles for the nascent field of real-world asset tokenization. These principles highlight the importance of covering the entire product range, pursuing end-to-end compliance, leveraging token standards for interoperability, and extending their functionality for efficiency and scalability. By combining regulatory, organizational, and technical perspectives, our work advances design knowledge for compliant integration of real-world assets into DeFi.