Russia Inaugurates Blockchain for Mortgage Loans
The Russian subsidiary of the Austrian lender Raiffeisenbank has run the country’s first ever mortgage deal on blockchain. It could be a taste of more to come in the nation.
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Real Estate, On Chain
In the transaction, a mortgage contract was issued as an xml document containing all relevant information, including data on the mortgage loan issuer, the borrower, date and place of signing the deal, the total amount of the loan, and the repayment period.
The use of blockchain for mortgage loan issuance is set to increase the safety of data storage, cut depository costs, and speed up transactions for both borrower and lender, Raiffeisenbank said in announcing the deal.
Normally, after sealing a mortgage deal, the borrower has to visit the bank again to deposit the mortgage contract, while the application of blockchain allows the borrower to do it remotely, also cutting the amount of paper documents.
The deal could become a game changer in Russia’s mortgage loan industry as the use of blockchain is set to make the resulting process more convenient for borrowers, while lenders will be able to cut their document processing and depositary costs by between two to five times, Raiffeisenbank said.
A deal of that kind was made possible thanks to recent amendments to Russia’s law on mortgage loans, which were enacted on July 1, 2018. Previously, mortgage contracts were accepted only in a paper form.
The transaction was implemented on the decentralized deposit system (DDS) on Masterchain, a platform developed by Russia’s Central Bank and the Fintech Association of major local banks aimed at testing and adopting advanced fintech solutions.
The DDS comes as the first project carried out on Masterchain, which is expected to become a basis for a range of new solutions and services that are currently being developed, the Fintech Association said, adding that companies from the economy’s sectors other than finance have also expressed interest in Masterchain-based solutions.
Another local lender, state-run Sberbank has also tested the platform with a similar mortgage deal but hasn’t yet used it for an actual transaction. It says it will begin using DDS for mortgage transactions as of the first quarter of 2019.
A Period of Technological Transition
Over the past year or so, Russian authorities on a national and regional level have been increasingly pushing for adopting blockchain-based solutions. Two months ago, the Caucasian republic of Chechnya said it will apply blockchain in municipal services and real estate projects.
However, the country still lacks regulations on blockchain and crypto, and a draft law expected to bring some clarity is still under consideration.
What’s your take? Do you think this mortage model could take off in other countries soon? Let us know in the comments section below.
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