The question of how blockchain technology is changing Finance as a whole is one question asked by futuristic labs in financial institutions, think tanks, consulting firms and government committees throughout the globe.
While many have researched on the topic, this lot include Goldman Sachs, McKinsey Consulting and Consumers' Research, the Senates of the US, Canada, Australia, and the EU have all made inquiries as to this same question.
More is still yet to be uncovered about the
solutions that accompany the blockchain.
A few areas for which answers already exist are ;
Infrastructure for Cross-border Transactions
The reflection of the Digital age has totally transformed media. it has made a tremendous effect in the finance industry also.
Groundbreaking moves in areas of cross border transactions in the international scenes.
Following the infographic by Richard Gendal Brown, the infrastructure and intermediaries in cross-border banking have existed for decades now.
With the innovation of blockchain technology, financial institutions can now have direct and immutable links between themselves and this would help them avoid correspondent banking.
Digital assets as a Class
With bitcoin came the something unique- I refer to it as the digital property.
In time past, the word digital was used to associate anything that appeared to be scarce. It meant that for something to classify as digital, it should be copiable by the click of a button. Examples are presented in the music industry- by simply clicking the "copy" button transactions would have been affected, leading to the transfer of digital property. But with bitcoin, it gets interesting as the digital property now remains protected by an uncopyable digital code.
So for the first time in a whole long while, ownership is guaranteed within the digital world.
So blockchain is not just changing the digital market, it also can be used to run the market more efficiently and without a breach of contracts. The application of the blockchain in the creation of smart contracts to over millions of transactions on behalf of both parties is another reason to be optimistic about the future of blockchain.
Governance and Markets
Besides, a lot can be explored with the use of the blockchain in government. Take, for instance, Nasdaq was one of the first to build a platform enabling private companies to make available and trade shares using a blockchain.
Other developers are coding financial instruments that can be pre-programmed to carry out corporate actions and business logic.
In 2016, the crowdfunding market was imitated using a project called DAO, which was built on the ethereum blockchain. The spending policy of the generated funds is dependent on the percentage contributed to the realized funds.
Regulatory Reporting and Compliance
Blockchain can make the job of regulators a lot less difficult by providing a fully transparent and accessible system of records.
Illustrations are within the banking sector. Banks are seriously obligated to report all transactions above various limits across the globe to relevant authorities and as such, anytime such a transaction takes place, the blockchain can enforce such compliance.
Clearing and Settlement
With the current world trend, paper trading has been very good but in term s of efficiency, it has been very inadequate. Processes of clearing and settlement of a transaction, in general, will no longer have to be three days after the trade (T+3).
With the introduction of the blockchain technology, the entire lifecycle of a trade- from execution to clearing and then final settlement is beyond doubt made possible with an effective and efficient set of rules guiding against post-trade latency and counterparty risk.
Accounting and Auditing
In contrast to most databases being snapshots from a moment in time, blockchain databases are built form their own transaction history. it has a history of itself which can be referred to as a self-contained system of record.