Tokenization of assets is an important catalyst for growth of any economy in the Digital world, with an increasing number of real world assets being represented in a digital form. Through tokenization, asset owners may discover new buyers for their assets and be able to engage more than one buyer as a result of being able to fractionalise their assets. In addition, potential buyers would have greater visibility into the details and transaction history of each asset, providing them with greater assurance and certainty.
Tokenization could also be used to represent legal rights to assets such as title deeds, although regulatory changes may be needed to facilitate this. The market for tokenization is still in its early stages, and there are many opportunities across asset classes which have yet to be realized. Where there is a business case, tokenization has the potential to drive the next wave of economic activities
Fubon Bank and Ripple explored in their pilot the use of tokenized real estate assets in granting a home equity line of credit (HELOC) to a real estate owner using a hypothetical e-HKD. When the lending protocol is triggered, property lien tokens are used as collateral by the bank in minting a residential mortgage loan, and the loan amount for drawdown is then credited to the owner in e-HKD. The process today is operationally- intensive for lenders and can span multiple systems. In this connection, the model of token-backed lending could enable lenders to provide a more efficient service to potential real estate owners to realise additional liquidity, which can in turn encourage uptake of such facilities
The Equity release solution
For the pilot, Fubon Bank, Ripple and consortium members Kodelab, Hex Trust, TOKO and BCW have developed a technical solution to enable the HELOC facility under the program requirements. This solution utilises technology from each member to provide a complete Blockchain based architecture:
- CBDC layer consisting of a private Ripple CBDC ledger and Ripple EVM Sidechain along with the Digital Currency Issuer to manage the hypothetical e-HKD
- The custody layer by Hex Trust provides regulated digital asset custody services.
- Business logic layer with Kodelab deploying their lending protocol and TOKO, the mortgage lien tokenisation engine
- Front end with Kodelab developing a visual representation of the lending protocol vault for Fubon Bank customers to operate the HELOC facility
Why Real Estate equity release?
“Tokenization of assets has gained considerable traction in the decentralized economy, and real estate, with its $3.7 trillion market value, presents a remarkable opportunity for integration. Traditionally, the real estate market has been hindered by complex regulations and intermediaries, leading to inefficiencies and additional costs. However, by incorporating real estate assets into Ripple’s network, transformative benefits can be realized.
One of the key advantages of tokenization is the autonomous and unrestricted nature of transactions. Tasks that were previously reliant on financial institutions and state-owned enterprises can now be streamlined, making the process faster, more accessible and cost effective”