Blockchain applications for compliance could reduce expenses. This is big news, considering the average cost of compliance reaches $436 billion dollars each year.
If you are interested in learning more about blockchain applications for compliance, keep reading to discover what else this technology can do.
Blockchain Helps Regulators
Although blockchain can make it easier for organizations to achieve and maintain compliance, this innovative technology also assists regulators. Because data is stored in blockchains, regulators can access that data for themselves.
This quick and easy access provides regulators with up to date information, which is far more beneficial than reviewing reports with past data. Such information will paint a more accurate picture regarding an organization’s current compliance procedures.
Blockchain Provides Greater Transparency
The blockchain’s stored data can be reviewed in order to gain an understanding of the activities that are occurring. This transparency will motivate financial institutions to take the necessary steps that lead to compliance
Blockchain Technology Accelerates ID Verification
KYC procedures can be a burden for both users and organizations. The process can frustrate clients and be expensive for companies to carry out.
However, the implementation of blockchain may diminish those aggravations. Here’s why:
- With this technology in place, users will have more control over their own information.
- Through the use of cryptography, personal data can be quickly, securely, and easily sent to third party services.
DLT is used to store all data on a single platform. Because of this, fraud becomes apparent sooner, making it easier to fight against financial felonies and misdemeanors.
Blockchain Gives Users More Control
Due to the outbreak of data breaches, hacks, and leaks, security is a top concern for consumers. Those who participate in the blockchain system will experience greater security because they will have more control over their own data.
By using zero-knowledge proofs (ZKPs), users are able to keep their data secure (as indicated by the term ‘zero-knowledge’) while sharing information.
Potential Issues with Blockchain Applications for Compliance
Despite its apparent advantages, blockchain applications for compliance aren’t devoid of possible complications. We are going to describe a few of them right now.
Slow to Adjust
Leaders of financial institutions and regulators may be hesitant to incorporate blockchain technology into their operations. These stakeholders need assurance of the technology’s worth from independent audits. This would speed up their willingness to try it.
Lack of Experience
Blockchain’s novelty further hinders its acceptance simply because audit teams haven’t had much experience with it. Their lack of experience limits their ability to work with this advanced technology.
Without an abundance of experts in blockchain technology, it will be more difficult for organizations to implement a blockchain-based system. Nevertheless, companies that do plan on using the technology will need to make sure its IT audit department is equipped to handle such a system.
Generally speaking, internal and external audits are adjustable. However, the processes that involve controlling, accessing, and administrating the blockchain system are non-transferrable.
Blockchain is just like any other new technology that comes along. Although these advances promise many benefits, adopting new technology is always risky.
Innovative leaders who are considering incorporating blockchain into their organizations must be willing to take calculated risks if the perceived benefits outweigh the potential downfalls.
Summary of Blockchain Applications for Compliance
According to Deltec Bank, Bahamas, “Financial institutions that plan on implementing blockchain will need to determine how to best utilize the technology for their specific purposes. Internal procedures and systems will need to be updated.” Furthermore, a willingness to work with external partners and competitors will also become a necessity.
While there are obstacles to overcome, it seems clear that we are headed towards fully embracing all that blockchain has to offer. This will increase data privacy while simultaneously decreasing the struggle to comply with regulations. Plus, it will be much easier for regulators to access real-time compliance reports.
By now it should be clear that blockchain applications for compliance are part of our future.
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.
About Deltec Bank
Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.