Fluidity plans to tokenize mortgages through smart contracts and cryptocurrency for back-end management.
The service is scheduled to launch this summer, once the appropriate licenses have been granted.
Fluidity chief architect Todd Lippiatt told CoinDesk,
“We’ll tokenize the house, which will effectively take the collateral that is the equity of the house. You’re pledging the house and you get an advanced rate back in terms of dollars… We will deal with the inner workings of the decentralized system. The borrowers pay back in dollars and we will also be managing the risk profile of the underlying securities.”
Here’s how it will work: borrowers will have to undergo online credit checks and have their personal information verified, similar to any existing online loan service. Fluidity will take that information and establish a smart contract with ownership of a mortgage represented in tokenized form.
Once that process is done, the loans can even be packaged together and sold as securities. These could be sold through an exchange such as AirSwap, a subsidiary of Fluidity.
Lippiatt also noted that the demographic of the underbanked and low-income borrowers are a prime fit for such loans. Fluidity plans to offer cheaper rates than banks, with borrowers going through a process similar to a traditional loan.
In the end, it’s the issuer and the trader who see the greatest benefit from Distributed Ledger Technology (DLT). Lippiatt noted,
“Our methodology provides better pricing that is determined solely by the intrinsic credit of the transaction, as opposed to external factors like domestic central bank governance policies and political trade winds.”
How Tokenization is Impacting Real Estate
The news is not the first headline featuring Fluidity or AirSwap and tokenized real estate.
Back in October 2018, AirSwap and Propellr announced a deal which involved the tokenization of part of a $30 million luxury property in Manhattan.
Tokenized real estate demonstrates just one asset class experiencing the benefits of DLT through security tokens.
In fact, AirSwap facilitated the world’s first compliant peer-to-peer transfer of a security token on a public blockchain.
Other tokenized real estate includes the St. Regis Luxury Resort in Aspen, Colorado, which raised $18 million through a Security Token Offering (STO).