Asset Class, Blockchain for Real Estate - Parallelledger/Parallel-Ledger GitHub Wiki

Parallel backup of Real Estate records using blockchain solutions.

The rise of blockchain technology brings significant opportunities to gain efficiencies and achieve increased transparency in the real estate business. The introduction of distributed ledger technology and the knock-on impact of initiatives such as the Utility Settlement Coin (USC) have the potential to significantly change the global real estate government operating model and asset management network as a whole. As a result, the roles of those overseeing the operations of such institutions will also need to evolve, such as that of the Asset Oversight, a role accountable for ensuring the operational effectiveness of the firm’s systems and controls.

Distributed ledger technology allows multiple counterparties to have simultaneous access to a single, shared, constantly updated digital ledger that cannot be altered. These ledgers can accept inputs from multiple parties, however they can only change with consensus. In a world where your core business is based on a trusted third party record and maintaining a log of ownership, blockchain has the potential to address many real estate related inefficiencies and risks.

With these changes, the AOO will see a significant shift in their role:

Data Accuracy Client asset books and records are held in disparate, semi-automated systems, which introduces operational risk and data validity concerns, necessitating the global asset safety office (i.e. the team responsible for the monitoring and oversight of asset management activities). Blockchain enables access to data through a decentralized, open and cryptographic network that eliminates doubt. Due to the established data model within the real estate business, data accuracy is also addressed; a challenge to many new industries adopting blockchain who have to create their own data standards Today, records may be held in as many as six layers (broker, bank, legal, clerk, registration and custodian, etc.) with different accounting views. With blockchain, all parties have access to the same record of ownership, eliminating the need for time and resource intensive reconciliations without sacrificing data accuracy Once the distributed ledger is adopted and integrated with internal systems (e.g. for reporting, etc.), legacy books and records systems may be retired, resulting in significant internal efficiencies and cost savings.

Reporting The distributed ledger could act as a golden source, simplifying the extensive internal and external reporting obligations Analytics and reporting could be streamlined using blockchain technology by extending access to the blockchain to regulators and potentially eliminating certain reporting requirements.

Client Service Offerings As ownership data is migrated to blockchain technology, it could result in the automation and eliminate redundancy of servicing processes. For example, corporate action processing could be inbuilt to a smart contract (a self-executing contractual activity, stored on the blockchain) and processed automatically Accounting and administration could be decoupled from other services, simplifying mortgage funding, loan servicing, accounting, cost and fee allocations and administration. Ultimately, primary transactions could happen directly onto the blockchain and subsequent changes in ownership tracked, significantly reducing administrative overhead and the risk of error As services are rationalized, the control frameworks that the AOO oversees are simplified Development of proptech offerings for new crypto-assets such as bitcoin keys.

For a business predominantly designed to address inefficiency and manual data management, blockchain introduces opportunity and potential disruption. However, real estate business management need to be aware of changes on the horizon, seize the opportunities and evidence control for the new risks introduced. Although it may not be an imminent threat to the current real estate transaction model, blockchain technology is gathering speed and Asset Oversight Officers must consider how they adapt to this new environment.