In
a previous post* we explained that a blockchain is a decentralised register
which can have a major impact on how we live and work. In this contribution, we
focus on the uses of the blockchain in the financial sector.
In its most extensive form, blockchain
technology could dramatically change the financial sector and monetary systems.
Virtual currencies
Even without making use of virtual currencies, such as bitcoin, blockchains can
be used to settle transactions quickly and cheaply by rendering the involvement
of traditional players in the banking system superfluous. This is done by
making assets "intelligent".
We'll write more about this in a later
post. In the meantime, it's important to note that most scenarios assume that a
virtual currency will gain in popularity and significantly accelerate the speed
with which the economic system operates. That being said, the setbacks which
bitcoin has experienced have undermined, to a certain extent, the public
opinion on the potential of virtual currencies. For instance, virtual
currencies, which have scarcely any transaction costs, make micro-payments
possible and will significantly accelerate the development of the Internet of
Things.
Consider for example a pay-per-view business model for newspapers,
whereby 0.1 cent per consulted article is automatically paid, or a parking
meter that charges 4.16 cents per minute a car is parked at a certain location.
Both are currently inconceivable given the transaction costs associated with
the intermediaries involved.
Several central banks have already
started experimenting. For example, on 24 March 2016, the Dutch National Bank
stated in its annual report that it is committed to the sustainability of
payment traffic through the development of a concrete prototype for a virtual
currency, DNBcoin, based on blockchain
technology. The Bank of England announced earlier that it had developed its own
virtual currency,RSCoin, in order to effectively monitor money
supply in the future, once virtual currencies have become mainstream. The World
Bank, the IMF and the Federal Reserve are all following these developments
closely. In this regard, Adam Ludwin had the following to say:
"The medium of money has only changed a
few times in history, from precious metals to bearer currencies to now our
ledger-based electronic systems. Bitcoin and blockchain represent a transition
to a new medium. This transition is often referred to as distributed ledger
technology, which is a reference to today’s centralized ledgers. But I find it
more helpful to look back to bearer instruments, like banknotes, to appreciate
what this new medium enables: a digital bearer instrument.
[SNIP] The goal of the blockchain industry is to collapse these steps
into a single step, where payment is the settlement, just like with physical
notes. This is what I mean by digital value transfer, which I sometimes like to
call money-over-IP. Soon, the phrase “cross-border payment” will make about as
much sense as “cross-border email.”
Beyond virtual currencies
The fact that blockchain technology will influence the financial system in
other ways is proven by the interest demonstrated by many other players. For
example, together with the technology company R3CEV, 42 of the world's largest
banks are currently investigating how the blockchain can be used to, amongst
other things, speed up financing transactions and minimise the settlement time
for all types of transactions. The consortium has even achieved an impressive
first result: Corda,
a blockchain-inspired register to record agreements between regulated financial
institutions, without the characteristics of public blockchains which would be
inappropriate for the objective pursued. The information in the register will
not be publicly accessible and transactions will have to be validated by the
parties themselves. The advantages of a decentralised register, however, such
as speed of settlement, are maintained.
Belgium is not far behind. KBC's Bolero
Crowdfunding recently launched an app to enable the trading of crowdfunding
shares via blockchain technology.
Finally, recent technological progress
has not escaped the attention of established players responsible for monitoring
behind-the-scenes developments. Euroclear and Swift have indicated that they
are learning more about the technology. What's striking is that although
blockchain technology puts their very existence at risk, they do not appear to
be concerned for the time being. It seems that the breadth and complexity of
the financial legislation currently offer them adequate protection.
The following chart indicates those aspects of the financial sector in
which blockchain, or technologies inspired by blockchain, is expected to have
the greatest impact.
No comments:
Post a Comment