To Bitcoin enthusiasts, the deployment of blockchain technology in the financial sector seems t be only a matter of time. While banks will not embrace the open blockchain standard anytime soon, they are actively exploring the concept of distributed ledgers. This only seems to be a matter of time until they realize permissioned solutions may not be the answer to their problems.
A new report by the World Economic Forum clearly states the financial industry needs blockchain technology. Even though the usage of this novel technology may not be visible on the surface, new processed and architecture based on the blockchain will help simplify back-end processes. However, the report also opposes the idea of embracing Bitcoin or radical fintech innovation, which is rather strange.
Several areas in the financial sector are prone to disruption. Cross-border payments are just one area where distributed ledgers will reduce costs and boost transparency. Other areas worth exploring, according to this report, are repackaging mortgages, compliance reporting, and rehypothecation.
As one would come to expect, banks will pursue the idea of issuing their own digital currency. Do not confuse these concepts with cryptocurrency, as they would not be decentralized, nor permissionless. Moreover, financial institutions would be able to retain full control over the [unlimited] supply, and who can use it.
World Economic Forum head of Finserv Industries Giancarlo Bruno told the media:
“Rather than stay at the margins of the finance industry, blockchain will become the beating heart of it. The technology will help build innovative solutions across the industry, becoming ever more integrated into the structure of financial services, as mainframes, messaging services and electronic trading did before it.”
It will come down to weighing the risks and benefits of embracing this technology on a large scale within the banking sector. Efforts will need to be focused and targeted, rather than throwing ideas as the wall to see what sticks. The possibilities are virtually limitless, but that does not make every idea viable in the long run.
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