California Leads the Way as U.S. Federal, State Agencies Consider Blockchain’s Applications: Bank of America
The California Department of Motor Vehicles (DMV) tokenization project is an example of how companies and U.S. state and federal agencies are using blockchain-based solutions to drive efficiencies and lower costs, Bank of America (BAC) said in a research report Thursday.
The department plans to revolutionize its vehicle title and transfer management system by tokenizing the more than 14 million automobiles registered in the state. It will issue vehicle titles as non-fungible-tokens (NFTs) with ownership recorded on a private version of the Tezos blockchain. NFTs are digital assets that represent ownership of virtual or physical items that can be sold or traded.
“Tokenization of vehicle titles could also enable fractionalized vehicle ownership, allow holders to pledge vehicle-title NFTs as collateral in the real world or within decentralized finance (DeFi) protocols and increase liquidity on vehicle marketplaces,” analysts Alkesh Shah and Andrew Moss wrote.
Bank of America says the project may cut the process of issuing and transferring vehicle titles from weeks to minutes, allow for more secure ownership transfer through smart-contract enabled escrow accounts, decrease fraudulent activity and encourage automation to lower costs.
The project is seen as a first step with the potential for additional functionality, the note said. These may include the ability to record repairs within the NFT, to use stablecoins as the payment leg for “atomic title transfers” and allow vehicle-licensing agencies from other states to join the platform so they can benefit from the same efficiencies as well as producing incremental efficiencies related to cross-state vehicle sales.
The bank notes that other federal and state agencies are also looking at blockchain-based solutions. These include the Federal Emergency Management Agency (FEMA), the Department of Homeland Security and the California Department of Food and Agriculture.
Read more: Crypto Software Firm President: We’re Trying to Make California’s DMV More Efficient With Blockchain