Why Is Starwood Holding Back on Tokenization?
Barry Sternlicht, chairman and chief executive of Starwood Capital Group, said his firm is prepared to tokenize real-world assets but cannot proceed because of regulatory constraints in the United States. Speaking at the World Liberty Forum in Palm Beach, Sternlicht said Starwood — which manages more than $125 billion in assets — is operationally ready to move.
“We want to do it right now and we’re ready,” Sternlicht said. “It’s ridiculous that our clients can’t do it in token,” he added, referring to the use of blockchain-based tokens to transact assets such as real estate.
Tokenization converts ownership rights in physical assets into digital tokens recorded on a blockchain. In real estate, that could allow investors to buy fractional interests in properties and trade them more easily, potentially expanding access beyond traditional institutional channels.
Investor Takeaway
How Big Could Tokenized Real Estate Become?
Real estate tokenization has been discussed for years, yet adoption has been gradual. A Deloitte report published last year projected that $4 trillion worth of real estate could be tokenized by 2035, up from less than $0.3 trillion in 2024. If realized, that would imply a 27% compound annual growth rate for tokenized property markets.
Deloitte wrote that “Tokenized real estate could not only pave the way for new markets and products, but also give real estate organizations an opportunity to overcome challenges related to operational inefficiency, high administrative costs charged to investors, and limited retail participation.”
Some firms are already testing the model. Propy, a blockchain-based real estate platform, outlined a $100 million expansion plan last year to acquire mid-sized property title companies across the United States, with the goal of modernizing and digitizing closing processes. These efforts remain small relative to the broader property market, which still relies heavily on manual documentation and intermediary-driven workflows.
Why Does Sternlicht Call It “the Future”?
Sternlicht framed tokenization as a technological leap rather than a niche financial experiment. “The technology is superior,” he said. “This is the future.”
He compared tokenization’s development stage to artificial intelligence, arguing that it is still earlier in its adoption cycle. “This is even earlier in the physical world than AI is,” he said. He described tokenization as “exciting as can be,” adding, “It’s a fantastic thing for the world, the world just has to catch up with it.”
His comments reflect a broader industry belief that blockchain infrastructure can streamline ownership records, reduce settlement friction, and widen investor access to traditionally illiquid markets. For firms managing private real estate funds, tokenization could offer new capital-raising channels and secondary liquidity options.
Investor Takeaway
What Is the Regulatory Constraint?
Sternlicht did not detail specific regulatory provisions blocking Starwood’s plans, but tokenized real estate offerings in the United States typically intersect with securities law, broker-dealer registration rules, custody requirements, and investor eligibility standards. Without clear pathways for compliant issuance and trading, large asset managers face legal uncertainty.
While blockchain-based property transfers are technically feasible, scaling them within the U.S. regulatory perimeter requires coordination across securities regulators and market infrastructure providers. Until that framework is clarified, tokenization efforts by major private equity real estate firms are likely to remain exploratory rather than operational.
For now, the gap between technological readiness and regulatory permission remains the central constraint. Sternlicht’s remarks indicate that institutional appetite exists. Whether policy evolves to accommodate that demand will determine how quickly tokenized real estate moves from pilot projects to mainstream capital markets.
