A stablecoin is a digital currency tied to reserve assets, such as traditional currency. Coadjute’s stablecoin will be linked to the Pound sterling.
It has been developed in partnership with blockchain technology company R3.
Dan Salmons, chief executive of Coadjute said the idea came about when the firm noticed the process of completing on a property transaction had not been innovated in decades.
He said: “That process where you’re sitting in the removals van waiting for the estate agent to give you the keys but he can’t because he hasn’t heard from the conveyancer yet, she’s on the phone and everybody’s waiting on a Friday afternoon is caused by the fact there is no infrastructure that connects all the different parties that need to move money.”
Salmons said the current method was also vulnerable to fraud.
“It’s a very insecure process that’s a burden on conveyancers, inefficient for the banks and is horrible for the buyer and seller. No-one benefits,” he added.
How it works
Digital currencies can be programmed for various uses. As Coadjute’s stablecoin has been designed to only be used for property transactions, it cannot be misappropriated for another purpose.
When the buyer or seller is ready, their funds are locked into their respective traditional bank accounts. Coadjute then issues stablecoins representing the money onto its ledger, a system which records transactions. The stablecoins are moved around and allocated to the necessary people ahead of the completion date.
The money is not released until the day of completion. When it is released, the money is converted back into traditional currency.
Salmons said this could speed up the transactions by not relying on bank transfers which can be slow and subject to working hours.
The system also allows for the parties involved to be certified. Only approved bank accounts can be used during the transaction, minimising the risk of funds being transferred to fraudulent or incorrect accounts.
“You can use blockchain to hide someone’s identity which is what happens with Bitcoin or you can use it to absolutely guarantee someone’s identity, which is what we do with Coadjute.
“Every party is a verified person and they really are who they say they are, any movement is happening between verified people,” Salmons said.
Additionally, each person can transfer their money over as early as they wish meaning funds can be ready ahead of time.
Salmons said: “Because the work can be done in the days and weeks leading up to it, there will be much less hassle, inconvenience and time.
“It will make the process of completion quick, efficient and secure – it is none of those three things today.”
John Reynolds, COO of Coadjute, added: “If you think about what a mortgage offer is, it’s a commitment to pay. It’s legally binding. At the point of offer, if we issue tokens onto the ledger, it’s a commitment that they can be redeemed for cash.”
Simplifying the process
Reynolds added that the stablecoin and Coadjute platform could simplify property transactions going forward.
He added: “The mortgage process is complex but the complexity comes from the need to use multiple systems.”
Coadjute will enable conveyancers, solicitors and lenders to use its system to provide a “joined up view” of the transaction. It allows each party to see how much money other parties have requested as well as who may still be waiting for payment.
The platform also provides a secure internal form of communication where parties can engage with each other, removing the reliance on email which can be prone to interception and fraud.
Salmons said he hoped that eventually the platform would be able to involve the buyer and seller to simplify the process further.
Reynolds said it would also reduce the risk faced by professionals.
He said: “The cost of all the payments that get pushed around is unnecessary.
“Professional indemnity for conveyancers has gone through the roof and a big chunk of that is attributable to the movement of cash.”
Further development
Coadjute will launch a sandbox for the digital currency in November where lenders, solicitors and conveyancers will trial the system. Respective compliance and risk teams will be able to understand and assess the process during this time.
Salmons said: “We anticipate coming out of that process at the end of the year with a view on the right way to do it.”
If all goes to plan, the stablecoin network will be piloted next year.
Reynolds said: “I think it’s enormously exciting. The completions process is beyond archaic. The way the process works with consumers pushing the money around is completely unnecessary.”
Salmons added: “Sometimes people find it hard to imagine that processes that have been terrible for a long time can ever be changed. We do not believe this should still be the same in 50 years’ time.”
