MQube Tokenises £1.3bn Mortgage Debt in European First

MQube has tokenised £1.3bn (US$1.73bn) of mortgage debt on the blockchain through its lending division MPowered. 

The UK-based fintech says the transaction marks the first time a European mortgage lender has moved residential mortgage assets onto an Ethereum Virtual Machine compatible chain.

The company operates MPowered, which provides mortgages under the One Day Mortgage brand. 

The tokenisation converts mortgage debt into digital tokens recorded on a distributed ledger. While equity, bonds and real estate have been tokenised in previous transactions, this represents the first European deployment of the technology for mortgage debt.

The move follows growing interest in blockchain applications within financial services, where institutions have been exploring uses for distributed ledger technology in asset management and trading.

Current applications and future potential

Stuart Cheetham, CEO of MQube, distinguishes between what the technology offers today and what it could enable once regulatory frameworks develop further.

“The benefits of tokenising debt right now are that it allows mortgage lenders to achieve data integrity, transaction security and audit traceability. But once the necessary regulatory and operational framework is in place – and there is still a huge amount of work to be done here – the opportunity for the mortgage lending industry is huge,” he says.

The technology could reshape how remortgage transactions are processed. 

Currently, these transactions involve legal processes that cost thousands of pounds as ownership is transferred between lenders. Tokenised assets could enable direct transfers on-chain, removing intermediary steps and reducing costs.

Securitisation market implications

Cheetham sees particular potential in mortgage securitisation, where lenders pool mortgage debt and sell it to investors as tradable securities. This process frees up capital that would otherwise remain tied to mortgage assets on balance sheets.

“The plethora of benefits include the ability to transfer assets from one lender to another cutting out legal process in a remortgage case, saving thousands of pounds per remortgage transaction. 

“Most importantly, however, the tokenisation of mortgage debt, paves the way for a brand-new mortgage securitisation market via the blockchain which involves the pooling of mortgage debt into a tradable and investable mortgage security,” he says.

The practice became widespread in mortgage markets before the 2008 financial crisis and has operated under enhanced regulatory oversight since then. 

Securitisation provides lenders with increased liquidity and reduced capital requirements, which can translate into lower borrowing costs for consumers as lenders gain access to cheaper funding sources. 

Blockchain-based securitisation could make the process more transparent and reduce transaction times.

Technology infrastructure

The tokenisation took place on an Ethereum Virtual Machine compatible chain, which allows smart contracts to execute automatically when predetermined conditions are met. 

This infrastructure has been used in various financial services applications, though mortgage debt represents a new asset class for the technology in European markets.

MQube says the development reflects its approach to mortgage lending, which includes processing mortgage applications within one day. 

The firm says it aims to use distributed ledger technology across banking operations beyond the current mortgage debt tokenisation.

“This is a remarkable development for our industry and we are proud to be at the forefront of monumental shift. 

“As a fintech business, we set out to reinvent the mortgage industry and now not only are we delivering one-day mortgages, but we are seriously addressing how we can use the cutting edge of blockchain technology to transform the entire banking ecosystem,” Cheetham says.