Introduction
Distributed Ledger Technology, more commonly known as blockchain is the ability to provide historical entries of any digital assets that is unalterable and provides transparency through the use of decentralization and cryptographic hashing. The significance of blockchain is that it has the ability to take both the time and cost associated with many processes resulting in enabling near real time operations (Deloitte, 2018). This technology is beneficial in the financial sector and can lead to major impact to transform reputable financial institutions by providing lower costs, faster execution of transactions, improvement in transparency, auditability of operations and more (University of Pennsylvania, 2018). Blockchain reduces risk in financial transactions by supporting ISO 27005 Rick Treatment Activity ( risk modification, risk retention, risk avoidance, risk sharing) which will be detailed in the recommendations below
Analysis
Due to blockchains permissioned restrictions, there are several advantages of this technology when used in in financial institutions. Blockchain’s unique structure provides cybersecurity capabilities no readily available in other legacy technologies used in the industry (English, n.d.). The Financial Action Task Force (FATF) in October 2018 issued a virtual asset guidelines that involves the digital representation of values that can be either traded, transferred, or used for payment in any investment purpose; the core of this function is based on the implementation of blockchain technology (Ishii, 2019). One of the largest cyber financial crime is money laundering which is reported to be approximately $2 trillion yearly. To combat this, blockchain technology uses a decentralized network making each participant or node require to validate changes. Also do to its process of record keeping, this technology ensures verified identification of each transaction that is conducted.
Recommendations
As stated previously, blockchain is an extremely helpful technology especially in the financial industry. Blockchain generates a revenue of $2.5 billion with a 2025 projected rise to $19.9 billion (Business Insights, n.d.) due to the vast financial and even non-financial benefits it provides the current market. Blockchain technology is changing and adapting to how companies do business. It is creating operational efficiencies and providing new opportunities in developing markets whose hyperinflation, political instability and corruption can deter future entrepreneurs (Misra, 2018).
The first advantage is the technology’s ability to resist cyberattacks such as hacking, DDOS attacks and various other forms of fraud by quickly identifying the adversary through digital ID (Pritchard, 2019). The next advantage is due to the world is globally interconnected, import and export is heavily influenced on the ability to transfer currency. Sending money to various countries, which is currently transmitting hundreds of billions of dollars internationally annually (Pritchard, 2019), saves the banks and consumers time and money by allowing the process to happen via smart devices. To follow up on transaction, traditional banking systems takes a lengthy amount of time to clear pending payments to complete making it inconvenient for individuals. However, through the use of blockchain, verifying the accuracy of payment and the potential of “double spend†is easier and simpler (Chandran, n.d.).
Conclusion
Emerging technology continues to be the driving force behind advancement in the everyday lives of individuals globally. Of the various technology, blockchain is one that is rapidly and consistently gartering momentum especially by senior level executives in the financial industry. It allows organizations the ability to become more transparent while simultaneously maintaining trusted and accessible financial transaction history. Blockchain has the ability to not only support direct users, it will also help shape all those who use financial data and allow for integrity in financial reports that will positively support and enhance the market.
References
Business Insights. (n.d.). Blockchain: Encyclopedia of Emerging Industries. Business Insights: Essentials. https://bi-gale-com.ezproxy.umuc.edu/essentials/article/GALE%7CAENWZD457979910/5b1c2f443f277eda128ffe4f72915e26?u=umd_umuc
Chandran, K. (n.d.). 4 ways blockchain technology prevents fraud, reduces risk, and helps consumers with ownership of data. A Decentralised Risk Score Platform | SingleSource. https://www.mysinglesource.io/blog/4-ways-blockchain-technology-prevents-fraud-reduces-risk-and-helps-consumers-with-ownership-of-data
Deloitte. (2018, October 3). Making Sense of Blockchain for Digital Finance. https://deloitte.wsj.com/riskandcompliance/2018/10/03/making-sense-of-blockchain-for-digital-finance/
English, E. (n.d.). Can Blockchain Help Reduce the Financial Industry’s Cyber Risk? Marsh & McLennan Companies. https://www.mmc.com/insights/publications/2018/may/can-blockchain-help-reduce-the-financial-industry-s-cyber-risk-.html
Ishii, Y. (2019, February 22). Blockchain Technology and Anti-Money Laundering Regulations under International Law. Welcome to ASIL | ASIL. https://www.asil.org/insights/volume/23/issue/1/blockchain-technology-and-anti-money-laundering-regulations-under
Misra, P. (2018, March 20). 5 Ways Blockchain Technology Will Change the Way We Do Business. Entrepreneur. https://www.entrepreneur.com/article/309164
Pritchard, J. (2019, December 2). Here’s How Blockchain Will Transform Banking and Financial Services. The Balance. https://www.thebalance.com/how-blockchain-is-changing-banking-and-financial-services-4174354
University of Pennsylvania. (2018, November 16). How the Blockchain Will Impact the Financial Sector. Knowledge@Wharton. https://knowledge.wharton.upenn.edu/article/blockchain-will-impact-financial-sector/
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