Technological revolution has finally hit the financial services industry. The spotlight is now fixed firmly on the transformative impact Fintech could have throughout the entire chain of banking. While it may seem stodgy and highly regulated, the financial sector offers some of the best ways to play around with tech trends. After all, technology has brought financial services much closer even to unbanked corners of the world, thereby enabling lust about anyone to make payments for services and products alike conveniently with the use of smartphones. Additionally, there’s nary a financial institution that doesn’t wish to explore blockchain along with the technology that underpins cryptocurrencies and the ways they could transform movement of money and everything else it comes with The highlight of the fin tech revolution is a decentralised digital lager of transactions all of which take place in across a P2P network of computers. This is what most have come to learn as blockchain technology and its benefits are rather numerous.
This lager securely and permanently records the history of exchanges taking place between the associated peers and is visible to everyone connected to the network. The potential impact blockchain technology could have on regulatory enforcement is rather profound as it deeply examines its countless applications in diverse contexts that acts as either a verification tool or vehicle for cryptocurrencies. Deploying blockchain and its technology as a verification element promotes compliance to set regulations and could potentially reduce the cost of enforcement. Given the nature of cryptocurrencies and their ability to preserve by concealing the identities of investors could greatly complicate regulators ability to curb certain kinds of unlawful conduct. But why is blockchain technology so relevant to the Fintech revolution?
It Promotes Regulatory Compliance
Considering the several applications within its umbrella, blockchain technology is able to warrant the preservation of transactions as well as historical records tied to each transaction. Thus, information preserved within the blockchain is automatically downloaded every time a computer joins the network on which it has been stored. The ability for parties to enter into smart contracts using coding on a blockchain in defining terms of a contract and automatically execute it when these product deliveries or terms are met. It similarly facilitates due diligence for to third-party business arrangements, acquisitions and mergers. This means that companies and organizations can work alongside third party vendors beyond the scopes of physical boundaries and still obtain certifications of compliance. Every time blockchain technology is used as a tool for preserving records, compliance with terms of the involved contracts is important as it has potential to enhance regulatory efficiency. This is significantly vouched by reduced cost, expediting the amount of time authorities and regulators spend on trying to promote legal compliance. This means that regulators could employ blockchain technology to verify the fulfilment of the applicable reporting or licensing requirements by the companies involved quickly and more accurately. With blockchain technology, they can additionally assess
their strengths to capitalize on them while monitoring their programs.
Initial Coin Offerings and Cryptocurrencies
Blockchain technology is also applied significantly as some sort of link for cryptocurrencies. Cryptocurrencies, unlike fiat currencies, do not exist in any tangible form — all of the transactions are conducted and the records kept in a blockchain. No governement or central bank has control over them. Additionally, holders of cryptocurrencies get to maintain anonymity which means that they can access their wallets securely via a private key. The quality of anonymity is capable of increasing the risk of fraudulent transactions thus complicating the regulators’ role in identifying the perpetrators of conducts deemed unlawful. There’s the selling of digital coins or tokens through ICOs, which takes place in the blockchain as well Initial Coin Offerings allow companies to fundraise through the sale of tokens which can be redeemed either for services or goods. The virtual nature of cryptocurrencies tends to make it difficult for authorities of law enforcement to view them as assets, which should subject them to seizure and forfeiture.
When blockchain technology is applied as a mechanism for record keeping and verification, it has the potential to reduce the time and costs associated with compliance with regulations and its enforcement. If companies wish to realize this prospect, both companies and the government need to work in tandem in order to address all regulatory concerns to root out any sort of illegal financial transaction.