Blockchain hopes to bolster trust in the global financial system

Blockchain hopes to bolster trust in the global financial system

Beyond the way we bank, Brian Behlendorf, Executive Director of California-based Hyperledger Project, believes that blockchain could transform the way we shop, transport goods and buy homes. There is one overarching reason why it could be a paradigm shifter: it reinforces trust.

 

“Not since the Internet has the world seen a technology with such potential to reinvent how companies do business and define their own value proposition to their customers, as blockchain,” said Behlendorf, Executive Director of California-based Hyperledger Project.

 

Blockchain is a decentralised ledger of transactions, held on a distributed network of computers. It is constantly growing and each transaction is distributed, and stored.  An example of where the technology is used is in the mining of bitcoin.

 

The ledger itself is immutable. In other words, it is not hackable explains Behlendorf, who will speak in depth about the potential for blockchain to transform business at the first Global Financial Forum organised by the Dubai International Financial Centre (DIFC) in Dubai on November 14.

 

Adopting blockchain for back office functions and settlement could reduce the global banking sector’s costs by up to $20 billion a year over the next five years according to research by Finextra, a research firm focused on financial technology.

 

The blockchain process allows banks to better vet customers, knowing that their personal information is verified and has not been tampered with. For customers, they have full access to their personal data.

 

Also blockchain will help overcome some of the mainstream financial system’s current vulnerabilities in the Middle East, Africa and South Asia region because it will safeguard financial transactions data, said a recent report published by the Economist Intelligence Unit. 

 

EIU claims that recent cyberattacks, heists on central and commercial banks and the corruption enabled by the cash economy will diminish thanks to this technology.

 

 

New tech on the block

 

For many, the intricacies of blockchain are elusive – as the Internet once was – and some prominent figures from the finance industry are resisting the change because they believe it will disrupt the status quo.

 

In a recent report published by rating agency Standard & Poors, analysts found that financial technology (Fintech) could reduce the profitability of some business lines of Gulf Cooperation Council (GCC) banks and change the way they operate over time especially in the areas of money transfer and foreign currency exchange.

 

“Like with anything new, there is a challenge with getting people on board, but with the correct collaborative ecosystem, educating the institutions and other users, and involving regulators from the beginning, blockchain is set to revolutionise business across the entire supply chain and for all industries,” said Behlendorf.

 

S&P said regulators in the GCC are looking closely at fintech, not only from a perspective of financial stability, but also from one of collaboration. Fintech Hive at DIFC, and the innovation testing license (ITL) created by the Dubai Financial Services Authority (DFSA), is an example of how regulators are approaching the fintech industry.

 

“While Fintech Hive at DIFC helps fintech companies benefit from collaborations with top executives at the DIFC over a 12-week accelerator programme, the regulatory sandboxes allow fintech companies to test their innovations in the real market in a restricted regulatory environment,” said S&P.

 

Arif Amiri, Chief Executive Officer of DIFC Authority, believes that enabling technology's development from the ground by providing the needed resources and regulations to support its growth is as important as embracing it.

 

“Our ongoing efforts at DIFC to create the optimal infrastructure, both physical and regulatory, to support progress in financial technology allows for a seamless propagation of the technology across the financial industry’s value chain, both in the UAE and across the wider MEASA region,” Amiri said.

 

With over 1,750 companies established in DIFC, the centre’s close ties with various government entities and its ability to facilitate connectivity amongst the MEASA countries, Amiri believes the UAE will play a vital part in harnessing financial technology for the region, in tandem with the developments taking place in the West.

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Source: Press Release

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