Can blockchain prevent land fraud?
Summary
Current land registry systems are prone to fraud as papers get easily lost or modified, and a lot of land parcels have unknown owners.
The potential solution is to use blockchain as a single source of land ownership data.
UNDP is testing a blockchain land registry system in India.
Sweden’s land registry agency partnered with ChromaWay to speed up the registration of land contracts.
Vermont approved the testing of blockchain in the land registry system, hoping to attract tech businesses and skilled labour.
Propy is a platform that enables users to buy property across the world with cryptocurrencies.
Blockchain is no longer just a buzzword, but rather a technology that can transform our lives. And although it was popularised by Bitcoin, its potential is way bigger. Blockchain smart contracts could change the way we purchase a car or make an agreement with a landlord. A small blockchain-based code on designer handbags could verify their authenticity, while expensive cloud storage could become cheaper. The opportunities are endless, and the blockchain technology market is forecasted to reach $2.3 billion by 2021. And as the market grows, companies are tackling increasingly complex problems.
One of these is the broken land registry system, which is prone to fraud and mistakes. The root of the problem is easily lost or modified paperwork, as well as the thousands of land plots with unknown owners. This creates a perfect storm of problems. Land fraud, double ownership, stalled investments, and corruption are just a few examples. Poor countries are especially vulnerable. As the United Nations’ Food and Agriculture Organization notes, “Land records in most African countries date back to colonial times, and the ownership of most holdings is unclear.” One of the proposals to solve this problem is to make blockchain a single source of land ownership data.
As an immutable digital record that runs on thousands of computers, blockchain could be the perfect solution. Land contracts could be verified in a matter of minutes with self-enforcing smart contracts, a single registry of land ownership would prevent fraud, and even powerful lobbies couldn’t tamper with official records. And although there’s a long road ahead, people are already taking the first steps.
Protecting the land ownership of citizens
The UN Development Programme (UNDP) is building a blockchain-based land registry system in the city of Panchkula, India. If all goes well, the project will be applied across the country. But many wonder if complicated tech can efficiently be used in a country with 287 million illiterate people? UNDP’s Alexandru Oprunenco is optimistic. The software won’t require any effort by ordinary people, and they’ll still have to come to the government office to register a land contract. Only this time, the contract will be registered in blockchain. And once all parties approve the deal, a permanent record is formed in Ethereum to serve as proof of ownership. As Oprunenco writes, “The blockchain engine simply works quietly but powerfully in the background.”
Similar initiatives are discussed in Africa where criminals use forged documents to claim ownership of land parcels. Courts are useless as they rely on incomplete paperwork to make decisions. Some see blockchain as a potential solution. Peter Tole, the head of a Nairobi-based real estate firm, created a land registry platform powered by the ‘harambee token’, a cryptocurrency. Users are rewarded with 100 tokens when they register a piece of land in the system, and penalised if they make a mistake. But Kenya’s central bank isn’t impressed. It rejects any use of cryptocurrency despite claims of rampant corruption in Kenya’s land ministry. And the situation isn’t any better in most other African countries. For example, 80 per cent of people in Ghana lack any kind of land ownership papers.
Reforming the system to attract investments
But land registry problems aren’t only present in poor countries. In Sweden, for example, it takes up to six months to register a land contract. The land-ownership authority, the Lantmäteriet, partnered with the startup ChromaWay to speed up this process. They developed a private blockchain network that will register land parcels. Initial tests will be run this year, and the goal is to complete transactions in a few hours without the need for the physical presence of buyers and sellers. The US state of Vermont will also test blockchain software in an effort to modernise its land registry system. But equally important, it wants to project an image of a business-friendly region and attract tech companies.
Despite the hype, it’s not a done deal
One of the more successful firms in this sector is Propy, a platform that enables users to buy property or land with cryptocurrency. Its first major success was in Ukraine, where it created software for land purchases on blockchain. The company now works with the government of Vermont, too.
UBITQUITY is another startup that’s transforming the land registry system. Its major client is the Real Estate Registry Office in Brazil. Their cooperation is limited to the Pelotas and Morro Redondo regions, where they used blockchain to create a backup of land registry documents. This will help resolve potential land disputes and prevent fraud. Finally, even IT behemoths such as IBM couldn’t resist the lure of blockchain. Although the details are scarce, it’s known that IBM is working on developing a blockchain-based records system that could be used in healthcare, real estate, and education.
But despite the hype, the application of blockchain in land registry systems isn’t a done deal. States must change laws and regulations. For example, Sweden still didn’t approve the digital signature in land registry documents. Without this, blockchain transactions aren’t legally binding. Then, there are powerful lobbies such as criminal groups in Africa, who will oppose any reforms as they stand to lose their fortune. It’ll take a lot of effort to cut through these problems.
Keep on walking to reach the goal
But if land registry systems across the world do become reliable, that will open a range of opportunities. People would be more comfortable to buy land, construct buildings, and invest. It would no longer be possible to bribe officials to modify the land registry. Families would feel safe in their homes. Blockchain can bring these changes, but it needs the helping hand of local governments. And even though the road ahead is full of obstacles, the first steps have already been made. We just need to keep walking.
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Meaning of trend
The latest application of blockchain technology is in the fraud-prone land registry system. As startups develop tools to permanently record land records in blockchain, many powerful groups stand to lose their fortune. Can governments push through with these reforms and protect the property of citizens?
Expert Opinion
"Bermuda has an old school deeds-based property system. What we are going to do is transfer our registry to the blockchain. Clearly it needs to be transparent so people know what's there and be secure, and that way we know who owns what at any point in time," says David Burt, the premier of Bermuda.
As Peter Tole, the head of the Land Layby Group, explains, “With blockchain you don’t really need to trust the other party, the system itself is trust. I see most African governments adopting this blockchain technology that will revolutionize land registries."
This article was originally published in 2018 on Provada Future.