Lygon records first Australian digital bank guarantee

Lygon - created by CBA, Westpac, ANZ, Scentre Group and IBM - recorded the first digital banking guarantee on its blockchain platform on Tuesday.

The consortium used a live event to "mint" its first industry standardised digital bank guarantee.

Minting, a piece of blockchain terminology, is "the computer process of validating information, creating a new block and recording that information into the blockchain".

ANZ acted as the issuer of the guarantee and Scentre Group the beneficiary.

A bank guarantee acts as a promise from a lending institution to match any debt that may result from a company failing to meet payments to a third party.

While it can help to secure leases, projects or property, the process can often take weeks.

The demonstration today using Lygon is intended to fast track the bank guarantee process, eliminate costly paper trails and reduce fraud.

“We have seen through this issuance today that the technology and legal frameworks are ready for digital guarantees,” Lygon CEO and managing director Justin Amos said.

“Over the next few weeks, ANZ and other issuer banks will finalise their readiness at their own speed to utilise the platform.

“This will provide a clear pathway for applicants and beneficiaries to request the issuance of digital bank guarantees.”

Amos added the launch bolstered Australia’s reputation as an “incubator for trailblazing fintech companies.”

“Our core technology can be applied to other types of payment guarantees and financial instruments, such as performance bonds, offering a wide range of opportunities to pursue as we expand Lygon’s reach and service offering," Amos said.