How blockchain can revolutionise fiscal transactions

This article is part of
Guide to bitcoin and blockchain

How blockchain can revolutionise fiscal transactions

It is important not to conflate cryptocurrency and blockchain and throw both technological advances out with the bit-water.

Blockchain, the global ledger technology outlined in the first article of this guide, is being explored and developed by institutions across the world and across sectors to see how it can be used to help make things easier and better for the end user.

For example, gaming on the blockchain is a real-world use case of the technology that could displace the whole gaming console industry.

Egor Gurjev, founder of the new blockchain gaming company Playkey, recently raised $10.5m (approx £7.4m) in an initial coin offering (ICO) and is working on ways to improve features such as remote game control.

But the technology can go far beyond gaming. Blockchain and distributed ledger technology (DLT) has practical uses across other sectors and industries. 

Many are already in development, with cases being trialled and tested in a number of areas including digital identity management, energy trading, tracking development finance, music royalties and asset clearing and settlement.

Financial services firms in particular seem to be at the vanguard to be early adopters of the technology, believing blockchain can create lower-cost, higher-security and more compliant processes.

Last year in a series of talks during London Blockchain Week, Peter Bidewell, blockchain technology advisory consultant for Accenture, outlined a series of benefits blockchain could bring. 

These include:

  • Simplified IT infrastructure.
  • Reduced cost of service.
  • Enhanced regulatory compliance.
  • Faster transactions.
  • Tamper-proof know-your client (KYC).
  • Improved cyber security.
  • Instant clearing and settlement.

"While the benefits of blockchain technology are widespread, the benefits provided are especially well-suited to enhancing the financial services infrastructure," says Jim Bai, chief executive of futures trading platform EverMarkets, which uses open-source blockchain technology.

Cleaner processes

For example, as Dror Futter, partner at Rimon Law, outlines, the "unique attributes" of blockchain make it well suited to "address pain points" in the financial services industry.

He explains: "For example, the cost and speed of the share-trading settlement process could be significantly lowered through blockchain-based solutions, while providing greater accuracy and transparency."

According to Mr Futter, cross-border payments represent a similar set of "pain points" which could benefit from blockchain improvements.

The safety and security of blockchain processes - despite the recent accounts of cyber-hacking into cryptocurrency wallets - is improving at a pace, meaning financial services transactions using blockchain could stand to benefit from ever-more robust technology, especially where data is concerned.

For Matthias Kroner, co-founder and chief executive of Fidor Bank, data is an important point to mention. "Data will become an organisation's most valuable asset," he predicts. "Blockchain provides new ways for registering, storing, managing and interacting with data."

As a result, he also believes blockchain will become even more important as a foundation to the open banking concept.

Mr Bai is of a similar opinion: "As ongoing blockchain-based initiatives mature and the decentralisation movement continues, we expect efficiency to increase, transparency to prosper and systemic risk in the financial ecosystem to be mitigated.