#Blockchain might not have shaken up #banking and finance as drastically as originally expected in 2008 but its impact has been much bigger than most people think. Let’s take a look.
From crypto, to digital currencies, to NFTs, to trading and to DeFi, blockchain applications have been spearheading #innovation while bringing real-life impact on segments such as cross-border payments, trade finance or digital asset management.
Some use cases clearly stand out:
— Smart contracts, i.e. computer code-enforced agreements that function autonomously, executing financial rules without a central authority. From real-time remittances to compliance onboarding to supply chain #finance to insurance processing and to lending, there are myriad applications
— The concept of digitalizing ownership rights, in a process known as tokenization whereby a blockchain token digitally represents a real tradable asset, could reshape the way we invest in assets by connecting up issuers to a more diverse set of buyers and sellers
— Over the past few years, central banks and governments around the world have multiplied digital cash initiatives. According to the Atlantic council 130 countries, representing 98% of global GDP, are exploring a Central Bank Digital Currency (CBDC)
— Privacy Enhancing Technologies (PETs), like zero-knowledge proofs can enable the validation of transactions and the application of customer eligibility criteria without revealing sensitive data. And on top help banks to comply with GDPR requirements
Big finance players from banking to #payments are betting on blockchain:
— Standard Chartered Bank and Deutsche Bank completed a proof-of-concept pilot that resembles Swift, connecting blockchain transactions, stablecoins and CBDCs on a single platform (UDPN)
— SWIFT has run a blockchain interoperability pilot that wants to unlock tokenization for financial institutions
— JP Morgan’s JPM Coin blockchain instant payments solution launched in 2019 now runs $1 bn transactions daily
— HSBC, BNY Mellon and other big banks have launched custody services for storing tokenized securities, as demand for custody and fund administration of digital assets is on the rise
— Visa is expanding its cryptocurrency services into merchant acquiring together with major processors Worldpay and Nuvei
— Mastercard has been piloting tokenized bank deposits in the UK
Whereas blockchain is clearly becoming a competitive advantage that cannot be overlooked, the real challenge for its expansion sits with its structure: existing banking and finance systems and platforms are not designed for blockchain. Therefore, the blockchain transformation will not happen overnight, but we are on a path that leads - failures notwithstanding - to more blockchain integration.
Opinions: my own, Graphic sources: Capco, BCG, World Economic Forum
