The Role of SPV Structure in Tokenization: A Comprehensive Guide

Tokenization is finding a new home in the world of Asset management. It’s redefining how the assets are operated. The SPV structure in tokenization enhances value creation, improves transparency, and streamlines transactions. A Special Purpose Vehicle (SPV) is a legal entity established for a specific, limited purpose, such as owning an asset or managing a project. By setting up an SPV, the sponsoring company can reduce financial risks related to the project or asset while benefiting from tax efficiencies, regulatory compliance, and other advantages.

“According to Boston Consulting Group’s 2024 report “Tokenized Funds: The Third Revolution in Asset Management,” Tokenized fund assets exceeded $2 billion in 2024, with projections reaching $600 billion by 2030”

This substantial growth underscores the increasing adoption of SPV structure in tokenization across various sectors.

What is a Special Purpose Vehicle (SPV)?

A Special Purpose Vehicle (SPV) is a separate legal entity created by a parent company to achieve specific objectives while isolating financial risk. It operates independently with its assets and liabilities. SPVs are commonly used by organizations to undertake particular projects, raise capital, or securitize asset-based financial products like mortgage-backed securities. 

By isolating risks, SPVs enable parent companies to mitigate potential financial loss and protect their core operations, even in the event of bankruptcy. These entities also serve as a channel for attracting both equity and debt investors.

Core Functions OF SPV

Example of SPV In Asset Tokenization

A business looking to raise capital for expansion could create an SPV and tokenize its equity to attract investors. This offers fractional ownership, improved liquidity, and access to new investment opportunities while minimizing dilution. 

For the business, it provides capital from a broader investor pool, a clear legal structure, and regulatory compliance.

Why Create an SPV?

Organizations establish SPVs for various strategic purposes that have expanded with technological advancement. 

Beyond traditional risk isolation and regulatory compliance, contemporary SPVs facilitate tokenized asset ownership via SPV structures, enabling fractional ownership of high-value assets.

For Example, Real estate developers can use SPVs to tokenize property investments, allowing smaller investors to participate in previously inaccessible opportunities. These vehicles also enable companies to optimize capital efficiency through off-balance-sheet financing while maintaining compliance with evolving digital asset regulations.

Modern Structure of an SPV

The structural framework of modern SPVs has evolved to accommodate digital transformation while retaining traditional legal forms. It often incorporates a hybrid structure that combines traditional legal frameworks with blockchain technology. This evolution enables automated compliance, transparent governance, and efficient SPV for digital asset management.

Benefits OF SPV In Tokenization

• Enhanced Liquidity

The SPV structure in tokenization enables assets to be divided into smaller, tradeable digital tokens. This fractional ownership model dramatically increases liquidity by lowering minimum investment thresholds from thousands to hundreds of dollars. Large illiquid assets like real estate or art can be easily traded on secondary markets, attracting a broader investor base and enabling portfolio diversification.

• Automated Compliance and Governance 

Through blockchain integration, SPVs can encode compliance requirements directly into smart contracts. This automation handles investor qualification, transfer restrictions, and regulatory reporting without manual intervention. The system automatically enforces holding periods, accreditation requirements, and jurisdiction-specific regulations, reducing compliance costs and eliminating human error.

• Transparent Asset Management

SPV for digital asset management provides real-time visibility into asset performance, ownership, and transactions. All activities are recorded immutably on the blockchain, creating an auditable trail. Investors can track their holdings, distributions, and voting rights through user-friendly interfaces, while administrators gain comprehensive oversight of the entire asset lifecycle.

• Efficient Capital Formation

Tokenized asset ownership streamlines the capital-raising process by removing traditional intermediaries. Smart contracts automate investor onboarding, fund collection, and token distribution. This reduces costs associated with middlemen, expedites the fundraising timeline, and enables global access to investment opportunities through standardized digital processes.

• Improved Asset Servicing

The integration of blockchain technology enables the automated distribution of dividends, interest payments, and other asset-related benefits. Smart contracts execute these distributions based on predefined rules, ensuring accurate and timely payments to token holders. This automation reduces administrative overhead and eliminates manual reconciliation processes.

• Cost-Effective Operation

The SPV’s role in tokenized securities is to reduce operational costs, digital documentation, automated compliance, and blockchain-based transfer systems to eliminate expensive manual processes. Smart contracts handle routine administrative tasks, while digital signatures and automated reporting reduce legal and accounting expenses.

Case Studies of Successful SPV Implementations

1. In 2023, Harbor tokenized a $20M student housing project using an SPV structure, democratizing real estate investment. Blockchain ensures compliance and liquidity, reducing investment barriers and making premium assets accessible to a broader audience. This sets a precedent for future tokenization and innovation in real estate investment.
2. CitaDAO tokenized two industrial units in Singapore worth over $1.2 million using an SPV. This innovation enhances liquidity for traditionally illiquid assets, enabling token holders to redeem the title deed with a 30% stake. Built on Ethereum, CitaDAO’s platform facilitates trading, demonstrating blockchain’s transformative potential in real estate.

Asset Tokenization with SPV: Regulatory Consideration 

Securities Regulations

The Asset Tokenization with SPV typically falls under securities laws in most jurisdictions. In the United States, these tokens are generally considered securities under the Howey Test and must comply with SEC regulations. This includes:

• Registration requirements under the Securities Act of 1933 (unless qualifying for exemptions like Reg D, Reg A+, or Reg S)
• Compliance with the Securities Exchange Act of 1934 for secondary trading
• Investment Company Act considerations if the SPV holds investment securities

Investor Qualification

 SPVs must implement robust processes for:

• Accredited investor verification when required
• Know Your Customer (KYC) procedures
• Anti-Money Laundering (AML) compliance
• Source of funds verification
• Geographic restrictions based on applicable laws

Transfer Restrictions

Smart contracts governing tokenized SPVs must encode:

• Holding period requirements (e.g., Rule 144 restrictions)
• Investor count limitations (e.g., 99 investor limits for 3(c)(1) funds)
• Transfer blocks to maintain compliance with securities laws
• Secondary market trading controls

Tax Implications

 Key tax considerations include:

• Tax treatment of the SPV structure (partnership vs. corporation)
• Taxation of token transfers and trading
• International tax implications for cross-border investors
• Reporting requirements for distributions and capital gains
• VAT/sales tax considerations for underlying assets

Custody Requirements

 Regulatory-compliant custody solutions must address:

• Digital asset custody requirements
• Qualified custodian requirements under the Investment Advisers Act
• Security measures for private key management
• Backup and recovery procedures

Ongoing Compliance

SPVs must maintain:

• Regular financial reporting to token holders
• Regulatory filings with relevant authorities
• Updated offering documents and disclosures
• Compliance with any jurisdictional changes in regulations

How to Create a Tokenized SPV for Business Capital Raising

Step1: Strategic Planning and Assessment

Define business goals, capital requirements, and investor profiles. Conduct market analysis to ensure demand for tokenized assets, identifying target investors for future token offerings.

Step2: Legal Structure Formation

Establish the SPV as a separate legal entity (LLC or Limited Partnership), ensuring compliance with securities laws and digital asset regulations. Draft necessary governance and compliance documentation.

Step3: Technical Implementation

Develop and audit smart contracts to manage token issuance and governance. Integrate blockchain technology, ensure security, and select an appropriate token standard (e.g., ERC-20 or ERC-3643).

Step4: Token Economics Design

Design tokenomics, including utility, distribution, and value accrual models. Define governance rights, dividend distribution protocols, and transfer restrictions to ensure transparent and efficient tokenized ownership.

Step5: Launch and Management

Execute the token issuance process, including KYC verification and investor onboarding. Set up systems for ongoing management, compliance monitoring, and communication with token holder’s post-launch.

How Antier Can Help?

Antier streamlines the tokenized SPV creation process through its Tokenization Platform Development Services.

With proven expertise in SPV blockchain integration and tokenized asset ownership, Antier provides end-to-end solutions including smart contract development, security token creation, and investor management platforms.

Their specialized team ensures regulatory compliance while enabling businesses to leverage cutting-edge blockchain technology for efficient capital raising and asset management.