As the banks and financial institutions from across the world shows interest in Bitcoin’s underlying blockchain technology, one particular bank, UBS has gone extra lengths to make the distributed ledger technology work for banking operations. The global investment bank based out of Zurich, Switzerland is exploring the use of blockchain technology to create smart bonds, cross-border payments solution, and even fiat linked digital currencies.
Calling blockchain technology the next internet, Axel Lehmann — the UBS Group Chief Operating Officer says that in the coming two or three years, it will revolutionize the world. According to UBS, the distributed ledger technology combined with digital currencies and crypto assets can make a huge difference in the way the financial system works. However, Bitcoin and other altcoins by themselves can’t make the same impact without being linked to real central money at one point or another.
Axel in his statement to the media accepts that there are still challenges that need to be overcome before blockchain technology can completely replace existing legacy systems. Solutions to technical, legal and security concerns have to be addressed before widespread adoption of blockchain technology can happen.
Smart wallets based on UBS’ recent white paper combined with other blockchain based solutions currently under development may change the way people trade in the near future. UBS, along with other banking institutions have already created a blockchain based United Settlement Coin for cross-border money transfer. The United Settlement Coin acts as a digital version of physical currency and can be transmitted over the blockchain to branches in the network.
According to Axel, it will take public blockchain to ensure flawless operations across institutions over a distributed ledger. It is worth noting that most of the banks are working on private ledgers and on many occasions experts have commented about the disadvantages of private blockchain over public ones when it comes to security and reliability.
However, private blockchain can be implemented within the banks to optimize their operations for a well-defined, distinct number of customers.
The R3 Global Banking Consortium is already making a headway with distributed ledger based applications for banking and financial institutions. With most of them still undergoing trials, it will be a while before they enter service.
Ref: Financial Review | Image: NewsBTC