Blockchain is basically a record of recorded monetary exchanges. This record is disseminated, distributed, and put away in numerous areas. At the point when an exchange happens, it is added to each duplicate of the record. This guarantees a precise record of exchanges.
While the web changed how we impart, blockchain will generally adjust how business is finished. … This change mirrors blockchain’s expense efficiencies from digitalising information and the security accomplished by cryptography.
Blockchain Technology Plays Pivotal Role in the RegTech Revolution:
The Regulatory Technology (RegTech) in financial services encompasses digital services on big data, biometrics, artificial intelligence, and machine learning to comply with regulatory requirements more effectively. And this industry is projected to cross $127 billion per year by 2024.
Blockchain offers many advantages that help boost RegTech evolution. It allows transparency because of its improved security via cryptography, distributed ledger, enhanced record-keeping, and faster and cost-effective through automation.
Here some uses of blockchain technology in the RegTec industry:
Regulatory Fund Management
Smart contracts offer a significant advantage because of automation and the ability to incorporate the essential aspects of regulatory reporting and comply with a fund’s regulatory norms in real-time.
The vast amount of information collected by big data can create a collection of unstructured data that have no use. RegTech companies implement blockchain technology to address this issue by producing data that is transparent and using a distributed ledger to make it obtainable for internal use, protect from frauds, and document for audit purposes.
Anti-Money Laundering, Client Onboarding, and Fraud Prevention
Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations for onboarding clients can be challenging for financial institutions as they need to gather their data on possible clients before they begin doing business. Also, they need to update the data regularly for existing counterparties, which is expensive and can take a lot of time. Banks can implement universal ledgers to distinguish their customers, track transactions, and identify fraud.
Many RegTech companies offer cryptocurrency firms solutions to help authenticate identity quickly and cost-effectively build on improved data analytics or biometrics in compliance with comprehensive regulations.
Monitoring transactions increases the transparency that blockchain offers because of the growing use of virtual currencies for money laundering. Additionally, it provides better traceability and quicker analysis when assets are digitalized.
The Key Applications of Blockchain in Regtech :
Regulatory Technology (RegTech) means technology-based services that help organizations with their regulatory compliance obligations, by which these services generally utilize cloud computing solutions and are delivered via the Software as a Service (SaaS) distribution model. The emergence of RegTech emphasizes the need for technological assistance to support organizations in their regulatory compliance efforts.
Let us look at the contribution of blockchain in Regtech:
To begin with, Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations for client onboarding are the most common use cases for blockchain applications in RegTech. Many companies try to handle this area since all financial institutions need to gather their own data on potential clients before they can start doing business with them. This data requires to be updated regularly for existing counterparties. It is indeed very time-consuming and also expensive with regard to both resources and money spent.
When it comes to cryptocurrencies, several firms have developed AML software designed to Bitcoin and other crypto transactions, which monitor activity as well as enable enhanced due diligence. At the same time, blockchain can solve the digital identity crisis.
Monitoring is another use case due to the increased transparency blockchain offers. This is also an obvious application in the blockchain world. The monitoring of transactions in cryptocurrency has increased the utilization of virtual currencies for money laundering. However, blockchain offers better traceability as well as faster analysis wherever assets are digitalized.
Record Keeping Made Easy
One of the biggest problems of Big Data is that, in many cases, the huge collection of information has led to huge amounts of unstructured data that has little to no use. While this presents a lucrative field for companies with different approaches, RegTech firms applying blockchain technology want to tackle the issue from its core. The purpose is to produce data that is transparent as well as a distributed ledger to make it accessible for internal use.
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