Once a niche technology used solely by crypto traders, blockchain is poised to become crucial to how real estate is bought and sold.
From title transfer tracking to using stablecoins for transactions, blockchain-powered tech is finding its way into the real estate world. Soon, being fluent in this emerging tech will be the equivalent of knowing how to send an email blast or use electronic signatures for important documents. We spoke with Robert Graham, a managing director and lead of the Digital Assets and Blockchain Technology practice at CBIZ, to get the scoop on how the premier professional services company is laying the groundwork for clients.
Blockchain Gets Real
The first adoption of blockchain technology occurred in the form of digital assets, such as Bitcoin and Ethereum. Today, some of the nation’s leading companies are incorporating blockchain technologies into their business processes.
“We’ve seen a lot of transformation of the industry over the last 10 years,” says Graham, who compares blockchain adoption to how businesses gradually integrated the Internet into their practices. “I think blockchain technology will evolve similarly, with an increasing number of traditional industries—including real estate—adopting it in one way or another.”
Specific to the real estate industry, the base use case for blockchain is as a ledger of transactions. Traditional real estate documentation for property ownership is a deed to a building or parcel of land, or, in the case of a REIT investment, shares of stock in that company.
Now, real assets such as real estate or financial instruments such as shares of stock are being listed on blockchains, which can have added security because the information cannot be manipulated or modified.
“We know that there are people looking to tokenize real-world assets, including real estate,” says Graham. “And certainly, the tracking of many assets today is done in a manner that could be improved.”
Real Estate Use Cases
Blockchains can be structured in many ways. At the most basic level, they can be broken into two broad categories: public and private. Public blockchains, such as Bitcoin, allow anyone to see the transactions on the blockchain, while the details of who owns the addresses that hold those tokens remain anonymous. Private blockchains function similar to a bank’s back-end operating system that tracks customer balances where only certain parties can access the information.
In an audit function, it’s very valuable to see evidence on a public blockchain or third-party ledger that isn’t controlled or manipulated by the company being audited.
“The benefit of blockchain from an accounting perspective is that we can see anything that’s on a public blockchain independently of something that a company is providing,” says Graham.
Blockchain has the potential to be used in a model that allows for the transfer of real estate in a more efficient manner, removing some of the burdensome processes such as title searches and title insurance. Stablecoins are another potential use case, allowing people to transact globally without having to exchange one currency for another.
“Technology can improve the speed, efficiency and costs of how some of these real estate transactions are completed,” says Graham. “From that perspective, there’s a large opportunity for blockchain technology to play a role.”
A New Practice Area
As blockchain evolved, CBIZ adapted its practice to better assist clients using the technology. Companies considering entry into the blockchain ecosystem are seeking guidance on a wide range of topics, including the security and internal controls that need to be in place before dipping a toe in the water.
A key starting point is to think about what they’re looking to do with the technology. Companies also need to consider how that use case applies to the regulatory and compliance framework in which an entity is operating.
CBIZ started its dedicated blockchain team to help clients navigate this new territory.
“We’ve invested in people who are interested and excited to learn about this and get through the use cases,” explains Graham. “But it’s really just a learning curve of what companies are using blockchain for, and then how do we adapt our traditional service offerings to fit those needs.”
Ten years ago, blockchain was very much a niche industry. Today, many traditional companies now have some sort of digital asset or blockchain technology involved in their business. The technology is likely to be more widely used and accepted as clarity improves on the regulatory framework around the use of blockchain.
“As with any new technology, it’s going to need to go through the education process of everybody understanding how it’s being used, what it’s being used for, and that’s something that we’re excited to see,” says Graham. “We’re excited to be a part of this changing landscape.”
To learn more about CBIZ’s blockchain practice, visit its website.