Blockchain: The Next Big Thing for Equipment Finance?
Blockchain technology, an esoteric topic a few years ago, has worked its way into the mainstream. Blank Rome’s Keith Letourneau and Stephen Whelan provide an overview of this distributed ledger technology and discuss how it could be used in equipment, commercial and trade finance transactions.
Two years ago, most readers of this article probably had not heard of blockchain. Since then, the following events have occurred:
- The keynote speaker at the 2017 ELFA annual convention identified blockchain as one of the top five trends in equipment finance.
- In February 2018, the California legislature introduced a bill (A.2658), which would expand the definition of electronic record in the Electronic Records Act to include a signature that is secured through blockchain technology.
- Delaware amended its General Corporation Law to permit use of blockchain in maintaining corporate records.
- The Securities and Exchange Commission allowed Overstock.com to issue digital securities, using a proprietary blockchain.
- Several prestigious law schools began to offer courses on distributed ledger technology, including blockchain.
Blockchain, a type of distributed ledger technology (DLT), continues to grab headlines as it proliferates across industries and market sectors. DLT promises to eliminate intermediaries, such as central clearing-houses, to facilitate transactions and the movement of goods. The essential elements of blockchain technology include computer terminal access (nodes) between each participant in the chain, the immutability of records logged into the system, a greater degree of security through the use of digital signatures and key-access software and transparency of transaction details by each participant having access to the complete ledger of real-time data. The use of smart contracts — digital computer protocols allowing the next transaction step to occur once predicate earlier steps are completed — also could amplify the utility of blockchain networks. We fully expect blockchain to reach into equipment financing transactions as the technology develops.
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“Blockchain: The Next Big Thing for Equipment Finance?” by Keith B. Letourneau and Stephen T. Whelan was published in the March/April 2018 issue of Monitor (Vol. 45, No. 2). Reprinted with permission.