Blockchain Applications in Financial Services

Distributed Ledgers in FinTech and Capital Markets

Distributed Ledger Technologies (DLT) allow the entire financial services industry to dramatically optimize business processes by sharing the data in an efficient, secure, and transparent manner.

Blockchain technologies are reshaping the landscape of financial services. Existing inefficient business models and profit pools are beginning to face a risk of disruption by upstart highly efficient blockchain-based platforms. Substantial benefits are to be gained using blockchain technologies, especially in back-office operations and to improve transparency, which is highly favored from an audit and regulatory perspective. Those harnessing these advancements are set to have key competitive advantages in the financial services industry in the coming years.

Durability and robustness

Blockchain technology is like the internet in that it has a built-in robustness. By storing blocks of information that are identical across its network, the blockchain cannot:

  • Be controlled by any single entity.
  • Has no single point of failure.

Bitcoin was invented in 2008. Since that time, the Bitcoin blockchain has operated without significant disruption. (To date, any of problems associated with Bitcoin have been due to hacking or mismanagement. In other words, these problems come from bad intention and human error, not flaws in the underlying concepts.)

The internet itself has proven to be durable for almost 30 years. It’s a track record that bodes well for blockchain technology as it continues to be developed.

Transparent and incorruptible

The blockchain network lives in a state of consensus, one that automatically checks in with itself every ten minutes.  A kind of self-auditing ecosystem of a digital value, the network reconciles every transaction that happens in ten-minute intervals. Each group of these transactions is referred to as a “block”. Two important properties result from this:

  • Transparency
    data is embedded within the network as a whole, by definition it is public.
  • It cannot be corrupted
    altering any unit of information on the blockchain would mean using a huge amount of computing power to override the entire network.

In theory, this could be possible. In practice, it’s unlikely to happen. Taking control of the system to capture Bitcoins, for instance, would also have the effect of destroying their value.

KYC and other AML concerns regarding Blockchain Operations

bitcoinThe main story regarding Bitcoin and others is the use that Organized crime has found for the technology. No one denies the criminality surrounding the Silk Road and its founder Ross Ulbricht using the darknet market for the sale of narcotics and firearms.

However, with the minimal amount of AML checks in a legal market Ulbricht and others would have been discovered and disrupted much earlier.

Specrim has entered this market at ground level and is structuring with its partners AML solutions for Blockchain Operations in the following markets:

  • Smart Securities via Smart Contracts
  • Post Trade Processing and Settlement
  • Loan Origination and Servicing
  • Foreign Exchange Markets
  • Derivatives Markets
  • Record-Keeping Processes
  • Auditing and Corporate Compliance
  • Corporate Shareholder Voting
  • Reducing Counterparty Risk
  • Cross-Border Payments
  • Many More