Blockchain Successfully Used in Commercial Leasing Transaction
By Cameron Abbott and Edwin Tan
After years of research and development, ANZ and Westpac have succeeded in utilising blockchain technology for bank guarantees in a commercial leasing transaction. The banks teamed with IBM and shopping centre operator Scentre Group to digitise the paper-based process using distributed ledger technology.
Currently, bank guarantees are usually in the form of a physical letter is that printed on bank letterhead and signed for authenticity. The tenant surrenders the guarantee to the landlord, which the landlord later uses to demand payment from the bank in the event the tenant defaults. This process brings with it several difficulties, such as the requirement to keep the physical document safe from damage and theft, and the potential for forgery.
The use of blockchain technology will allow both parties to rely on the shared ledger as a single non-disputable source as to the existence and status of a bank guarantee, saving time and costs in document management and tracking of the guarantee’s status. Encryption of all records on the ledger ensures that only the parties to the transaction can view its contents, maintaining its confidentiality. In addition, the technology gives landlords the ability to request a new guarantee on behalf of the lender – for example, where incorrect names were provided to the bank, requiring rectification – something not available in the current paper-based process.
While this transaction was intentionally limited in scope as a proof-of-concept, its success means that the solution can be transferable to a broader context, such as the ASX’s plan to replace the CHESS equities settlement system with blockchain technology.
Read the full whitepaper here.