Can Blockchain be the Answer to Address Issues for Finance Industry?
By Enterprise Security Magazine | Wednesday, February 06, 2019
Digital revolution has engulfed almost all the companies across industries. It has disrupted traditional processes to provide innovative and efficient solutions. The finance industry has been using the digital medium for effective solutions for decades. Implementing blockchain technology is on the topmost priority for financial institutions. Many fintechs have been producing white papers about their innovative solutions using blockchain technology.
A cross-border transaction poses the most number of hurdles for most of the financial institutions as they are yet to find an adequate solution that can bypass the present complex infrastructure for simple transactions. Blockchain technology avoids correspondent banking by creating direct links between financial institutions. The blockchain technology provides a common database that financial institutions could use to keep track of the execution, clearing, and settlement of transactions without the need to involve any central database.
Before Bitcoin, anything digital could be copied with the click of a button. Bitcoin has been instrumental in creating a unique digital property which cannot be copied. To take adequate advantage of this solution, many companies are planning to issue public shares of their company on the blockchain platform. Nasdaq became one of the first marketplaces to build a blockchain platform enabling companies to trade and issue shares.
Compliance regulation is a significant cause of concern for financial institutions, especially for international transaction. Leveraging blockchain solution can allow these institutions to have a fully transparent and accessible system. The blockchain solutions can be coded to authorize only those transactions that comply with existing regulatory reporting. For example, banks have to report any transaction which is more than ten thousand dollars to FinCEN. FinCEN stores this information to use it as an anti-money laundering database.
Blockchain solutions store the entire life cycle of a trade stage like execution, clearing, and settlement. A user can control the ownership of their digital asset, which will help to lower post-trade latency and counterparty risks.