World Economic Forum Report on Blockchain’s Role in the Future of Financial Infrastructure

A comprehensive report by the World Economic Forum released yesterday reiterates the importance of blockchain technology in global finance. The 129-page report presents the findings of an in-depth analysis of nine different use cases of the distributed ledger technology.

The report titled “The Future of Financial Infrastructure – An ambitious look at how blockchain can reshape financial services” presents the findings from an earlier Deloitte/World Economic Forum report – “Disruptive Innovation in Financial Services”. A product of over one year of research involving industry leaders and subject matter experts has resulted in 6 key findings on the future of blockchain technology in finance.

WEF report

Key Findings

  1. The potential to offer simple and efficient financial services infrastructure and processes.
  2. It may not be the ultimate solution, but it is one of the many technologies that will lay the foundation for next generation financial services infrastructure
  3. The technology can be used for a range of applications where its implementation varies from case to case.
  4. Digital identity offered by blockchain technology can expand existing financial applications across new verticals. Use of distributed ledger technology to create digital fiat currencies can further amplify its benefits.
  5. A deep collaboration between incumbents, innovators and regulators is required to create impactful applications.
  6. The new blockchain based financial services infrastructure has the potential to disrupt the existing processes, questioning the validity of existing business models.

The report explores the use of digital current technology in global payments, insurance claims processing, trade finance and lending, capital raising, automated compliance and proxy voting in investment management and market provisioning sectors.

The importance of blockchain technology as reported by World Economic Forum will add more credibility to the digital currency technology industry. The migration of financial institutions from the conventional system to blockchain technology-based operational methods will not interrupt their normal operations. As most of the changes will be made behind the scenes, institutions will be able to cut down time and cost of operations without compromising on their customer service.

With over $1.4 billion invested in blockchain technology by various institutions in the past three years, the development and implementation of applications built on the technology is expected to continue into the future.

Access the full report here

Ref: World Economic Forum | Mashable |NY Times | Image: World Economic Forum

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The Bank of England is playing a very strange game right now. The institution is keen on issuing its own national virtual currency. However, they are still no fan of Bitcoin, as they feel the currency is “peppered with flaws.” Such a statement is not entirely surprising, though, as no banks have a vested interest in embracing a digital currency they cannot control.

Interestingly enough, a representative of the Bank of England has announced the UK will not adopt a central digital currency anytime soon. While Bitcoin is not centralized by any means, this could indicate they will not go ahead with their plans to issue BritCoin either. At the same time, the financial institution remains a big fan of blockchain technology, as it can make central banking more efficient.

Bank of England Thinks Bitcoin is Flawed

A meeting took place between the Bank of England and the House of Lords yesterday. On the agenda was the topic of issuing a national virtual currency using distributed ledger technology. Research had to be done to determine how such a project would impact commercial banks and other aspects of finance.

As it turns out, an electronic central currency is not such an easy way out as initially assumed. For now, these plans “remain a long way off”. There are technological barriers that need to be overcome, and it would also involve a significant restructuration of the entire financial system. Integrating a distributed ledger technology system with existing infrastructure is quite a challenge.

Bank of England’s Monetary Policy Advisor Ben Broadbent stated:

“If you are talking about an all-singing, all-dancing central bank digital currency, replacing not just the liabilities we currently handle, but prospectively substituting it for commercial money then yes, that is a long way off. That is not just about technology; that would be a matter for the shape of the financial system.”

But Broadbent went even further, as he called Bitcoin a currency with “huge deficiencies”. That is not entirely surprising, as no central bank in the world would embrace decentralized cryptocurrency. This is part of the reasons to why these institutions want to embrace blockchain technology, as they can build private and permissioned solutions.

The department of work and pensions in the United Kingdom is experimenting with a currency called GovCoin. This particular solution examines the usage of blockchain technology for welfare payments. However, there are still some regulatory concerns that need to be addressed in the future.

Source: Ars Technica

Header image courtesy of Shutterstock

Although Europe seems to be divided on Bitcoin, blockchain technology remains a popular topic. During the Annual Meeting of the New Champions 2016, Luxembourg Minister of Finance Gramegna acknowledged the potential of Bitcoin technology. In fact, he feels confident this technology will revolutionize banking and financial services.

It is positive to see government officials acknowledge the power of blockchain technology. At the same time, it is important to remember they are not talking about Bitcoin technology itself. Instead, they see distributed ledger technology in a centralized form, which can be controlled at all times.

Luxembourg Minister of Finance Pierre Gramegna stated:

“Blockchain will revolutionize banking and financial services as we know it. I think it is possible that blockchain will replace the word ‘internet’. By the time our children have children, the only time they will see the word ‘internet’ is in science and history books.”

Blockchain Technology On Everyone’s Mind

Moreover, there is a growing focus on blockchain technology beyond the financial sector as well. It is evident for everyone to see this technology will disrupt finance as we know it. Cutting costs, allowing for real-time transactions, and providing global settlement are just a few of the possibilities waiting to be explored.

Many people see the blockchain as the future system for accounting, corporate governance, insurance, and even voting. Mainly this latter option is kind of interesting, as various companies are exploring blockchain voting already. There are no limitations to how and where blockchain technology can be implemented over the coming years.

Luxembourg is also quite open to blockchain technology, as the country wants to position itself as an innovation hub. But being keen on technology is just one fact of embracing this technology. Without a regulator to apply rules and to create an ecosystem where innovation can thrive, adoption of this technology will be difficult.

Discussing these topics at the World Economic Forums’ Annual Meeting of the New Champions is kind of interesting. Ignoring the potential of distributed ledger technology is no longer an option. We can only hope regulation will allow for innovation in this space, rather than imposing strict rules.

Source: Finextra

Header image courtesy of Shutterstock

Financial institutions have shown a keen interest in the concept of distributed ledger technology, and some countries have even taken the plunge of creating their own national digital currencies. While digitizing fiat currency may seem clear as day to same, it could pose a major threat to the business model of commercial banks. Bank of England is rethinking their plans with blockchain technology for the time being, as all of the risks need to be weighed carefully, especially where the central bank role is concerned

Also read: Japan Set To Reconsider Stance on Taxing Bitcoin

Bank of England Does Not Get Overexcited Yet

At a time during which financial innovation will mean the demise or survival of many banks in the coming years, rushed decisions are the last thing anyone needs. Blockchain technology, which presents distributed ledgers t decentralize a lot of aspects associated with finance, is a powerful tool that can be wielded by anyone in the world. But without proper understanding of what this technology can do, there are a lot of potential doom scenarios to keep in mind.

The Bank of England is one of those financial players keeping close tabs on the progress being made regarding distributed ledger technology. But at the same time, they keep their feet planted firmly on the ground, rather than getting carried away by the concept of creating national digital currencies.

Private blockchains, which is how banks would wield distributed blockchain technology, could very well lead to competitive threats from commercial and challenger banks. After all, the funding of other banks and the supply of credit lines is handled by the central bank as well. At this time, it remains unclear what role distributed ledger technology would play in that regard, yet it could put banking competitors out of business completely.

There are tough times for central bankers, as they are trying to figure out how to keep up with the evolution of finance. Bitcoin, FinTech, mobile, and peer-to-peer solutions are all bringing direct competition to the business model of central banks around the world. A private blockchain would give central banks even more power than ever before, as they will decide who gets access to their balance sheet and who doesn’t.

Bitcoin, the most popular modern digital currency is existence today, has shown how distributed ledger technology can create a financial ecosystem accessible to all. Additionally, everyone can see the total supply of bitcoins – which has a limited supply cap, whereas fiat currency is subject to inflation – and transactions are publicly broadcasted in real-time. Central banks will never adopt this same business model, as they don’t want other banks to figure out where the money is coming from and flowing to.

Central Bank Digital Currencies Are Dangerous

It is impossible to predict the global effect of central bank digital currencies right now, yet the concept can create very dangerous precedents. A lot will depend on how these central bank digital currencies are designed, and how accessible they will be to consumers and other banks. Will they replace the current units of account, will they run in parallel, or is there another strategy at play?

Assuming these creations would ever see the light of day, it will be entirely controlled by the central banks. They can opt to make bank lending more expensive or scarcer, and there is nothing anyone can do about it. This would, in turn, have a big effect on the global economy, which remains on very wobbly legs since the recent financial crisis.  However, there is also a chance the central bank will use digital currency in a “positive” manner, and reduce the demand for physical cash altogether.  

Source: Daily News

Although a lot of people active in the Bitcoin world have been saying this for a while now, it looks like digital currency pose a legitimate threat to replacing national currencies in their current form. That statement was made by Tony Richards, Head of Payments Policy Department in Australia during a speech a few days ago. The world of finance and payment is changing, and digital currency combined with distributed ledger technology are a driving factor.

Also read: Ethereum Price Technical Analysis – Watch Out For 100 SMA!

The Changing Payment Infrastructure In Australia

Cheques have been one of the more common forms of payment in Australia for quite some time now, yet the usage of this medium has become less frequent. While there is no reason to think cheques will become extinct shortly, the numbers are declining year over year, which can be mostly attributed to the surge of electronic payment methods.

This  accelerated decline in cheque payments needs to be taken into account properly. At an average decline of 13.5% percent per year between 2010 and 2015, it will not take much longer until this medium of payment is no longer being used. However, there will always be those who stick by cheques regardless of alternative payments, and the final nail in the coffin might take a few years to materialize.

What is equally impressive is how the usage of cheques is not declining as fast in other countries around the world. Regions such as the United States, France, And Canada are still seeing healthy numbers regarding cheque payments on a yearly basis. While this method of payment is still on the expensive side in terms of resource costs for financial institutions and merchants, it is being used far more often than people would give it credit for.

“As payment habits and processes become more digital and cheques continue to decline and become harder and more costly to use, there will be a requirement to transition cheques to more efficient and sustainable payment methods. The APCA Australian Payments Plan initiative will deliver a collaborative approach to ensuring more convenient payment choices are made available to all users of the payment system, prior to the identification of an end date for cheques.”

Cash payments are often touted as the most common form of payment these days, although this statement is not entirely accurate. At the same time, it is hard to compare the usage of cash to electronic payments, as there is very little data available. The most recent study on cash usage dates from late 2013 and indicated how cash payments remain one of the most important options for lower-value transactions.

Despite more recent information not being available to measure the usage of cash payments these days, there is a decline in the number of ATM cash withdrawals in Australia. Furthermore, point of sale transactions involving cash are becoming less popular as well. Contactless and traditional card payments, on the other hand, seem to be on the rise all over the country.

Enter Digital Currency And Distributed Ledger Technology

Tony Richards is not excluding the possibility of seeing traditional currency becoming extinct in its current form and having it replaced by a digital version of the Australian Dollar. Even though there are no official plans to consider this change just yet, the possibility can no longer be ignored.  If this were to become a reality, Australia would follow Barbados in digitizing their national currency.

Bitcoin will, most likely, never be able to replace the Australian Dollar in current or digitized form. Due to the popular digital currency’s price volatility and lack of governmental and bank control, it is at the bottom of the list of candidates in Australia. But at the same time, Richards acknowledges Bitcoin should be praised for interest in distributed ledger technology.

“The Bank will be interested to see what proves to be possible and what proves to be problematic, as countries consider going down the path of digital currency issuance. Given the various cybersecurity and cryptography risks involved, my personal expectation is that full-scale issuance of digital currency in any country, as opposed to limited trials, is still some time away. And I think it remains to be seen if there is real demand for a digital equivalent of cash and what it might offer end-users relative to what will be offered by the various forms of real-time payments that are being developed in many countries through projects like the NPP.”

Issuing a digital Australian Dollar could take place on distributed ledgers while still being overseen by the central bank. Additionally, the verification and distribution of currency would be done by authorized entities, creating another example of how a private blockchain would look and feel. However, a digitized Australian Dollar would not entirely replace the current medium of money, but rather run in parallel.

Source: Reserve Bank of Australia

Digital Asset Holdings is one of those companies who keep making media headlines these days. The blockchain startup, led by Blythe Masters, has recently signed a strategic business deal with Accenture. As a result of this collaboration, Digital Asset Holdings will gain additional resources and expertise while partnering companies will get access to their distributed ledger technology solutions.

Also read: Bitcoin Price Watch; More Upside to Come?

Non-Exclusive Business Relationship With Accenture And Others

It is not the first time Digital Asset Holdings signs strategic partnerships with major players. Just a few weeks ago, the company announced how PricewaterhouseCoopers had shown an apparent interest in their distributed ledger technology for financial purposes. At the same time, this news served as another notch on the belt of the Blythe Masters blockchain startup.

Both Accenture and Broadridge have joined forced with Digital Asset Holdings as well, bringing a lot of knowledge and expertise to the blockchain startup. What makes these agreements of particular interest is how they are non-exclusive, allowing all involved parties to sign future deals with other companies and service providers as they see fit.

One fundamental issue about the blockchain that needs to be addressed sooner rather than later is figuring out how distributed ledger technology can be scaled in the future. Strategic relationships with companies such as Accenture, PwC, and Broadridge will spur further innovation and growth in the blockchain space.

Most of the focus of the solution offered by Digital Asset Holdings lies in the financial sector. Distributed ledger technology can help reduce costs, errors, and even capital requirements for any company active in finance.The Blythe Masters-led blockchain startup can now continue to expand their reach across major companies while ensuring they deliver top notch services to all of their clients around the world.

Accenture’s Global Capital Markets Practice Manager Owen Jelf stated:

“The potential for Distributed Ledger Technology to bring innovation to the financial services industry is clear. Developing and implementing the technology on an industrial scale is the next step. Our close collaboration with Digital Asset will help financial institutions realize this potential, bringing new levels of efficiency and revenue.”

The main reason a partnership between Digital Asset Holdings and Accenture is so important is because consulting and system integration services will be provided to clients exploring the blockchain space. Moreover, Accenture will offer a broad range of services, including business case assessments and cybersecurity advice.

The Involvement of Broadridge

Broadridge, on the other hand, brings expertise and resources to the table. This will help Digital Asset Holdings to drive adoption of innovative business use cases by leveraging Broadridge’s network of capital market clients. Furthermore, the blockchain startup will be able to set a new standard for quality and efficiency of service in post-trade solutions.

Vijay Mayadas, Global Head of Strategy Broadridge Financial Solutions explained:

“Digital Asset’s Distributed Ledger Technology combined with Broadridge’s breadth of expertise and resources to deliver post-trade solutions for top global banks across 70 countries will accelerate our shared mission to advance efficiency, security and compliance across the global Capital Markets.”  

Strategic partnerships like these are of incredible value for a blockchains startup such as Digital Asset Holdings, especially when keeping in mind how all of these relationships are non-exclusive. Future innovation in the blockchain space should not be hindered by archaic agreements, as distributed ledger technology is designed to be used by anyone and everyone in the world.

Source: Digital Asset Holdings

There are many different use cases for the blockchain outside of the realm of finance, and slowly but surely, people see the benefits of this technology. In Ukraine, the next series of elections might make use of the Ethereum Blockchain. Such an electronic election system is quite a novelty in the world of voting, and it can be utilized for different types of elections in the future.

Also read: The Chinese Vases in Dragon’s Tale

E-Vox Merges Elections With Ethereum Blockchain Technology

One thing election processes lack is transparency, as well as real-time results. Even though various countries around the world use electronic voting these days, it still takes hours of manual verification to tally the results. The entire process would be more convenient and streamlined if distributed ledger technology would be used.

Ambisafe has developed a prototype to use the Ethereum blockchain for election purposes. Rather than using colored coins or issuing new assets, the company employs native smart contracts, which take Ukrainian political differences into account. E-vox, as the system will be called, allows for elections on any level, and provides scalability.

One of the main reasons why smart contracts will be used over colored coins is because Ukraine has a particular set of regulations that need to be taken into account. Votes need to be registered as votes, and hybrid solutions are not allowed. A colored coin would be a different representation of a vote, and could be declared invalid. Smart contracts circumvent all of these worries, and they are native to the Ethereum blockchain as well.

The first stage of public testing for the prototype developed by Ambisafe will see E-vox used for petition and advisory vote purposes. These tests will show whether or not the prototype is viable, and how it can be improved in the future if needed. Once the testing has been deemed a success, Ukrainian legislation will be amended to accommodate for this new technology.

Some people might be wondering whether or not this system could run into regulatory issues down the line. While it is certainly possible E-Vox might be scrutinized at some point, various politicians are on board with Ambisafe and their project. Only time will tell whether or not this Ethereum blockchain-based system will be deemed legal or not.

Ambisafe is not the only party involved in this massive project, though. Among their partners are Bitcoin Foundation Ukraine, Vareger Group, and Distributed Lab. More strategic partnerships are on the agenda, but no official details have been revealed yet at the time of publication.

Ukraine Confirms Interest in Blockchain

It is not the first time Ukraine gets involved with distributed ledger technology provided by the [Ethereum] blockchain. In January of 2016, a new online auction website was announced in the Odessa region. The primary objective of this platform is to sell and lease state property in a transparent way, and fight corruption and fraud at the same time.

Furthermore, Ukraine has been working on bringing more blockchain educational efforts to consumers as well. A few weeks ago, there was the BIP002 conference in Lviv, and there was the Bitcoin Conference Kiev in September of 2015. Bitcoin, Ethereum and blockchain technology all have a bright future in Ukraine by the look of things.

Source: E-Vox

It is no secret that distributed ledger technology will make a major splash in the financial ecosystem over the next few years. Other than speeding up transactions and reducing fees associated with transferring value,  distributed ledgers also create a global form of finance that was previously impossible. DH Corporation has applied blockchain technology to its global payment services offerings already, and became the frontrunner in the financial industry to do so.

Also read: Gaming Giant Wargaming Starts Accepting Bitcoin Following BitPay Integration

Blockchain Technology Makes DH Corporation A Frontrunner

People residing in Canada will have probably heard of DH Corporation by now, as their bread and butter is bringing technology solutions to financial institutions around the world. To take things to a global level, the existing legacy system has proven to be insufficient time and time again. Distributed ledgers, on the other hand, are the solution moving forward.

Up until this point, it remained unclear as to how the blockchain would make its way to global payment services. While the advantages are clear for everyone to see, integrating this concept into a system that has seen little to no innovation for several decades is not as easy as people would like it to be.

While DH Corporation claims to have integrated distributed ledger technology into their offerings, they are still in talks with various banks to bring such a solution to the mainstream. This may strike some people as odd, as blockchain technology is designed to operate outside of the control by banks, begging the question why bank participation would be required in the first place.  

As one would come to expect, details on the technology side of things are very hard to come by at the moment. What we do know is how DH Corporation used the blockchain to extend their Global PAYPlus solution. Furthermore, this solution is designed to manage different payment types and currencies in one system, offer financial services in a borderless fashion.

Focusing On Peer-to-peer Finance

IBS Intelligence reports how DH Corporation has allegedly partnered with Ripple Labs to bring distributed ledger technology to Global PayPlus. As a result, the entire blockchain solution operates as a “closed loop, connecting different bank networks together. This distributed ledger technology implementation makes real-time peer-to-peer payments become a reality,

Peer-to-peer payments are evolving, and distributed ledger technology will help bring this concept to consumers all over the world. But there is more to the blockchain that just that, as this innovative solution offers unprecedented financial security. Faster settlement of payments around the world is a major step forward for the financial system as we know it today.

At the time of publication, NewsBTC was still awaiting an official response from DH Corporation regarding their blockchain implementation.

Source: DH

Even though many people do not give much credit to the blockchain service Ripple has managed to create, there seems to be a growing demand for their services in Asian. Thanks to a deal with SBI Holdings, this technology will be able to merge with banking industry experience and create a new company called SBI Ripple Asia. With a large focus on Taiwan, Korea, Japan, and China, Ripple’s enterprise solutions will focus on cross-border bank payments.

Also read: Bitcoin Price Watch; Aggressive Upside Trade

Ripple Keeps Gaining More Popularity In Asia And Beyond

In the Western world, concepts such as Ripple are not gaining too much traction. Part of the reason for this lack of growth can be attributed to a very fierce competition between banks, FinTech companies, and digital currencies. When there is an abundance of choice, it is hard to stand out amongst competitors.

At the same time, things seem to be going swell for Ripple in the Asia-Pacific region as of late. Not only will these enterprise settlement solutions keep making their ways to Australia and Singapore, but an expansion has been planned for other Asian countries as well. Ripple APAC will continue to service the demand in their current markets, whereas SBI Ripple Asia will target a different market.

SBI Holdings, Inc, a well-known global financial services company, has partnered with Ripple to bring cross-border payments to banks active in the region. Countries including Korea, China , and Japan, will soon be able to make use of Ripple’s enterprise solutions. With non-cash payments on the rise in all of these countries, there is a growing demand for companies with commercial deals with top banks in the Asia-Pacific area.

Ripple seems to check all of the boxes in that regard, as their distributed financial technology will help transform financial infrastructures all over the world. However, gaining traction in Asia is not an easy task for any company, which is where SBI Holdings, Inc. comes into the picture. With their track record of joint ventures, this partnership could help put Ripple on the Asian map.

Ripple Co-founder and CEO Chris Larsen stated:

“SBI’s deep expertise and relationships across banking, capital markets, insurance and payments will help aggressively scale Ripple in some of the fastest-growing financial markets in the world. Interbank payments establish the foundation of the Internet of Value. SBI is the perfect partner to help forge that foundation and then extend Ripple’s capabilities to new use cases in the future.”

Furthermore, the partnership with SBI Holdings, Inc will not only help bring this technology to banks throughout Asia, but there are also plans on the table to list XRP on various trading platforms. SBI Holdings, Inc runs the largest online trading platform in Japan, which seems to be an excellent for Ripple’s native asset.

More Exposure For Distributed Ledger Technology

Regardless of whether one agrees with what Ripple is doing or not, the overall story is how distributed ledger technology will gain a ton of exposure in the Asian markets. Even though this is not the Bitcoin blockchain as most people know it, Ripple is an extension of the underlying distributed ledger protocol. By showing banks and consumers how this technology can be wielded for settlement and cross-border transactions, the entire digital currency ecosystem stands to benefit.

Granted, Bitcoin offers exactly the same level of technology at its core, but takes an entirely different approach to achieving its goal. But it is also important to keep in mind this is just of the many use cases where distributed ledger technology can thrive over the years to come. Bitcoin, Ripple, and others, can peacefully co-exist.

However, there is one major difference between the solution offered by Ripple and Bitcoin’s distributed ledger technology. The former will still use trusted parties as a middleman overseeing all of the transactions, and intervene wherever necessary. Bitcoin, on the other hand, is looking to automate this process and remove the need for middlemen altogether.

Source: Press Release via Email