Equity release loans using Blockchain


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”

Benefits & Outcomes
  • Tokenised real-estate, money and lending protocols can lead to reduced manual operations, paper-based processes and reconciliation efforts
  • A lending protocol can be appropriately set up, managed and monitored by a commercial bank to meet their needs in the creation and servicing of collateralized loans
  • Lenders could facilitate more customised loans at greater scale using services built on these technologies
  • Lenders could have increased access to lending markets and customers which are currently unaddressable or unserviceable for the institution

Benefits of Equity release loans using Blockchain

  • Provides a full online, streamlined channel for accessing funds based on excess equity in properties
  • Achieves a faster approval of loans and drawdown facilitated 24×7 with real-time availability of funds
  • Increased automation, real-time reporting and decision making
  • Secure, traceable audit trail of funds through the digital economy, from minting → distribution of funding → allocation to lending facility backed by property lien → drawdown by the customer → spending of funds → repayment of loan → loan closure
  • This audit trail can extend to records of the underlying property collateral on the Blockchain
Further Info

“According to Welfare, central bank digital currencies (CBDCs) are gaining traction, and Ripple is making significant efforts to create real-world use cases for them. Ripple’s focus is to tokenize the real estate industry.

Notably, Welfare recently made a presentation at a fintech conference in Romania titled: “Tokenization is the future of real estate.”

In his presentation, he showcased a pilot program that combines the hypothetical digital Hong Kong dollar (e-KHD), finance lending protocols, and tokenized real estate.

Per Welfare, the pilot program, which leverages Ripple’s CBDC platform, allows users to tokenize real estate as loan collateral.

It is worth noting that the initiative is part of the Hong Kong Monetary Authority’s (HKMA) CBDC pilot program. Ripple joined the program on May 18, 2023, partnering with Fubon Bank to offer solutions for real estate tokenization.”



Proof of concept in 2023 with HKMA

Researched by Antony November 2023

The CBRC Score of 88 has been awarded:

“Real estate equity release is a complex task today, and this solution would make it significantly more accessible for people to be able to:

  1. Access the equity from their property (most people cannnot do that now)
  2. Access a “fraction of the equity”
  3. Do it at speed
  4. Do it at low cost
  5. Use a Digital Currency as the output to invest quickly and safely elsewhere”

A more detailed understanding of the CBRC Score is available on Request

© Antony Welfare 2024