Is Bitcoin Technology the Future of Mortgages?
3 minute read
The phenomenon of bitcoin – a controversial but ever-growing form of digital “cryptocurrency” – is overlapping for the first time with conventional mortgage lending, as a number of major banks in the Hong Kong market aim to use one aspect of bitcoin technology as part of their standard mortgage process.
What is Bitcoin?
If you’re not familiar with bitcoin, the concept can take a bit of getting used to. It is a digital currency and payment system that allows direct peer-to-peer transactions via the Internet without an intermediary such as a bank or other online payment portal. All transactions are mathematically verified by “network nodes” – users’ computers running the bitcoin software – and exchanges of bitcoins are recorded in a public “distributed ledger” that is known as the “blockchain”. While bitcoin has been controversial due to its potential use for illegal activity and transactions, its benefits lie in relatively secure, low-cost transacting through a system that is “decentralised”, rather than requiring a conventional payment portal such as a bank or online payment provider like PayPal. It is the public and decentralised nature of the blockchain ledger that at least two Hong Kong-based banks – Bank of China (Hong Kong) and HSBC – are looking to exploit in their mortgage processes.
Using the ‘Blockchain’ to Speed up Applications
Rather than utilising bitcoin or blockchain in any actual lending capacity, BOCHK and HSBC (and potentially several other banks in the city) are hoping to use blockchain to effectively act as a decentralised database for Hong Kong property valuations, based on the fact that as potential homebuyers shop around for mortgages, surveys may be conducted multiple times on the same property. By aggregating this valuation data on a secure database – the blockchain – it has the potential to allow lenders to check a home’s value within seconds without sending a surveyor to the property. The valuation-checking system is being developed by the government-backed ASTRI – the Applied Science and Technology Research Institute. According to Duncan Wong, the vice-president of financial technologies at ASTRI, “To the best of our knowledge, this will be the first production-grade [blockchain] mortgage system to integrate with a bank.”
Will this be the Future?
It remains to be seen whether this first attempt by banks at utilising the technologies behind bitcoin – a system which financial regulators, legislative and law enforcement bodies in various countries have previously expressed concerns about – is actually the first step in a more mainstream adoption of the new technology in mortgage lending and the provision of other financial services. Image source