A new report from the Bank of International Settlements (BIS) has outlined three possible use cases for blockchain technology in the industry.
While conceding that blockchain and digital ledger tech (DLT) hold great promise, the paper argues that most projects are in the proof-of-concept phase and will require additional time before going mainstream.
"The first wide-scale use of distributed ledgers in payments is likely to be years away, as technological, legal and other hurdles will need to be overcome," according to the work.
The paper, titled "The Quest for Speed in Payments", explains the three main areas of blockchain innovation as securities settlement, cross-border payments and bank-issued digital currencies.
Securities settlement has traditionally been a slow process, the multiple-day process of money changing hands could be reduced significantly by the incoming tech, according to authors who state:
Blockchain enabled innovation in the securities settlement space is already being explored by Australian Securities Exchange, which bought a $15m stake in Digital Asset Holdings to trail technology related to trade settlement.
The second area of innovation, cross-border payments can be streamlined by eliminating intermediaries such as Swift and Western Union, and settling directly peer to peer. However, this will be difficult, the paper states, because of jurisdictional differences regarding regulatory and operational frameworks.
The last area of innovation, bank-issued digital currencies, focused on the traditional role that the banking systems plays in payments. By decentralizing the payments process, new companies could potentially reshape banking and the financial markets.
The opinion by the BIS that blockchain tech is promising, yet a long way off, is well documented. A different paper published in February argued that much work is needed before DLT can satisfy regulatory requirements and meet industry needs.
Analyzing data image via Shutterstock
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