Blockchain’s appeal – its decentralised nature, which makes it more transparent and efficient – is the exact same thing that makes it so hard for banks to start using it. At odds with the way banks operate, the blockchain complicates law enforcement and make it harder for banks to comply with the regulatory controls to which they are subject. And yet: its potential is huge.
A blockchain is a forgery-proof database whose control and decision-making are distributed across a network rather than being held by a central authority. It is this decentralised nature that makes it difficult for financial institutions to ensure transactions are compliant with Know-Your-Customer (KYC), Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT) and sanctions requirements. However, blockchain also offers many advantages, including enhanced transparency, reduced intermediation costs and increased security. Every transaction is recorded across a shared, synchronised ledger that is visible to all authorised participants, making it nearly impossible to alter records without detection.
It is essential that all relevant stakeholders collaborate so that the financial industry, clients, and fintechs can collectively benefit from blockchain technology to foster new growth with enhanced resilience and inclusiveness.Boon-Hiong Chan
