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Blockchain Can Back Up Regulation at Reduced Amounts

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Blockchain Can Back Up Regulation at Reduced Amounts

Financial blockchains will feature mobile phone networks  many will operate on internal networks much of the time and also be able to connect with other blockchains, that was the view of Peter Randall, CEO of SETL and founder of Chi-X.  There will be many different chains.  Those chains are capable to talk to each other, many banks will have many chains.  The model for this is mobile phone networks the chains can talk together and the billing can be taken care of by the technology.  Distributed ledger technology will do to finance what the container did to freighting.  David Geale, director of policy at the U.K.’s Financial Conduct Authority (FCA), agreed with Randall that blockchain implementations need to work within the existing regulatory framework, both for currencies and for functions like providing investment advice.

The FCA is probably the most forward-thinking regulatory on the globe, as it works proactively with fintech startups. It has required that banks provide APIs to open up their systems so customers can share their banking information with third party providers, such as advisers or aggregators.  Regulation has to keep up with the times,If things are changing and can be done better, we can waive rules. If someone comes up with a  brilliant way to do disclosure, we can waive the rule that it be done on paper, if such a rule exists.  The FCA also offers a sandbox for fintech firms and banks to experiment with new technology. It could waive rules. If things go wrong, the regulator it would expect a firm to reimburse customers, but it might might not impose penalties like fines.

Geale thinks fintech could improve regulatory reporting, providing better information at a lower cost.  The FCA is running a tech sprint (hackathon) on financial inclusion and plans another on regulatory reporting.    In addition, FCA has been pleased with the industry’s enthusiasm for blockchain, or distributed ledgers.  It sent out a request for comments and received 350 responses, and some very good ideas.  Distributed ledger technology is a huge areas for experimentation and they are looking at ways of finding better records and AML, using the cloud to communicate with the regulator and machine learning to spot risks.  Chris Corrado COO and CIO of the London Stock Exchange Group (LSE), said “technology provides a better way to do compliance by automating collection of data and using a Hadoop-based infrastructure, his firm is able to look for patterns; it is a better way to run a business.  The LSE trade reporting platform is a reg tech set of software that helps people with compliance while reducing their foundation cost significantly. 

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