Tokenization of Infrastructure

The report argues that tokenizing the equity or debt of sustainable infrastructure projects can lower the cost of capital and make these assets more bankable. It identifies key value propositions including reduced underwriting and secondary market fees, enhanced transparency through IoT integration, and the democratization of investment via fractional ownership. However, it notes significant regulatory hurdles regarding security token compliance and technical challenges concerning the reliability of the Ethereum blockchain and the 'oracle problem' of linking on-chain tokens to off-chain physical assets. The document provides examples of Swiss start-ups like Tokenestate, Smart Valor, and Mt Pelerin that are developing security token standards and marketplaces to facilitate this transition.

• Tokenization can significantly reduce the costs of going public. While traditional IPO underwriting fees for deals under USD 100 million in the US can be 9 to 11 per cent, and overall listing costs can reach 15 to 22 per cent of transaction value, experts estimate that tokenization fees could fall below 5 per cent as the sector matures.
• The technology addresses the inherent illiquidity of infrastructure assets. Traditional private deals can take months to exit and cost USD 10,000–20,000 to re-paper; tokenization enables secondary markets that can eliminate illiquidity discounts to net asset value (NAV), which academic research estimates at 20–30 per cent, though in practice they can reach 40–60 per cent.
• Integration with the Internet of Things (IoT) and smart contracts can improve project bankability by providing real-time, verified data on operational performance. This reduces information asymmetry, allows for more accurate project finance modelling, and decreases the contingency costs required for construction.
• Tokenization enables the financing of small-scale infrastructure projects that are typically uneconomical for private financing due to high transaction costs. By decreasing due diligence and transaction expenses, it allows for the cost-efficient bundling of individual small projects or portfolios.
• A primary regulatory obstacle is the lack of clarity on how security tokens can comply with existing financial regulations. Because property rights are not yet tokenizable on-chain, issuers must currently use off-chain special purpose vehicles (SPVs) to hold legal ownership of assets and issue equity tokens.
• Technical risks include the 'oracle problem'—ensuring consistency between on-chain tokens and off-chain physical assets—and the perceived instability of the Ethereum blockchain. Some institutional investors are hesitant due to Ethereum's short track record and the risk of '51% attacks' if the value of tokenized assets exceeds roughly 50 per cent of the blockchain's market capitalization.
• Swiss initiatives are pioneering security token standards to ensure legal compliance. Mt Pelerin developed an open-source 'Bridge Protocol' to handle voting, asset seizure by court ruling, and KYC compliance, while Tokenestate proposes a hybrid architecture using off-chain databases for GDPR-compliant personal data and on-chain smart contracts for auditable transactions.

APA

Uzsoki, D. (2019). Tokenization of Infrastructure. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/tokenization-infrastructure-blockchain-solution.pdf

Chicago

Uzsoki, David. Tokenization of Infrastructure. International Institute for Sustainable Development, 2019. https://www.iisd.org/system/files/publications/tokenization-infrastructure-blockchain-solution.pdf.

Wikipedia

{{cite report |last1=Uzsoki |first1=David |title=Tokenization of Infrastructure |publisher=International Institute for Sustainable Development |date=January 2019 |url=https://www.iisd.org/system/files/publications/tokenization-infrastructure-blockchain-solution.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{uzsoki2019tokenization, author = {Uzsoki, David}, title = {{Tokenization of Infrastructure}}, institution = {International Institute for Sustainable Development}, year = {2019}, month = jan, url = {https://www.iisd.org/system/files/publications/tokenization-infrastructure-blockchain-solution.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }