A project set up last year by Sweden’s land registry authority, the Lantmäteriet, to trial blockchain technology for recording property deals has just moved to its second phase.
Conducted by blockchain startup ChromaWay and consultancy group Kairos Future, the initiative is also working in partnership with two banks: SBAB and Landshypotek.
“It could be a great benefit for economic growth,” said ChromaWay CEO Henrik Hjelte on the project’s potential, further arguing that Sweden is the ideal place to test a blockchain system for land titles, as trust in public authorities is high and could influence agencies elsewhere to follow suit.
Under the proposed system, a buyer and seller would open a contract where banks and the land registry can view the workflow of the deal, such as due dates for payments.
“In the blockchain confirmation of each step in the workflow is made with a hash, like the blockchain normally,” said Magnus Kempe of Kairos Future, adding: “Everyone has the same information and you can check it yourself.”
Another use example is verifying the existence of the IOU issued by the bank to the property buyer.
“That part is going to be hidden for the others in the contract. You will only have the hash confirming from the bank that the IOU has been signed,” said Kempe.
The newly entered second phase involves examining how the technology can be integrated with banks’ existing processes when verifying contracts. The firms indicated that ChromaWay’s platform won’t be handling any payments on the system – those will remain separate.
SBAB Bank however said it has no immediate plans to implement the tech, saying:
“Our reason to participate in the project has not been to actually implement the solution in our current processes. But rather an opportunity for us to get a better understanding of the blockchain technology and how it might possibly fit in our future products/offerings.”
Trusting the digital
There remains one major hurdle to fully integrating this blockchain system for selling a house from start to finish.
“We want to work fully digitally, but the law requires, at the moment, physical signatures on the papers, which makes it difficult,” explained Kempe.
While trust in digital contracts has been lagging for a long time, he argued that blockchain tech can now provide the trust needed to move forward.
“As soon as the legislator understands that this is possible, I think it will come true,” said Kempe.
Helping that process, the EU passed a directive in 2016 that puts more weight behind digital signatures and could eventually influence Swedish policy.
For now, the land registry project is looking at ways of working around the issue. Kempe said:
“Actually, the land registry today, they don’t receive much physical paper, they get PDFs of the contracts which are signed electronically so they don’t store the physical contracts. What we are thinking of is, you can actually sign the contract digitally in the blockchain to the land registry, they can award the land titles and then you can throw away the paper so you’re not dependent on the physical archive.”
ChromaWay and Kairos Future said that they have been approached by more than a dozen public authorities from other countries expressing interest in the project.
The team explained that they don’t hold any patents for the platform, preferring to see other organizations work on similar schemes, eventually leading to more collaboration.
Sweden’s testing of the blockchain for land titles is possibly the most ambitious application of the technology in real estate thus far. Others are working on the concept, however. Early last year, the land registry authorities in Eurasian nation Georgia began working with blockchain startup BitFury, which, in February, signed a memorandum of understanding to extend the tests to other government agencies.
According to ChromaWay’s Henrik Hjelte, the use of blockchain could be transformative for developing countries in managing ownership of property and improving transparency in real estate sales.
On the other hand, proof-of-concept tests in Honduras were put on the back-burner in late 2015 over an apparent breakdown in communications between the government and Factom, the company that was supposed to conduct the trials.
ChromaWay and Kairos Future are confident about the future, though. Kempe said:
“There’s very little reason to think that this won’t work.”
Sweden image via Shutterstock