The Hong Kong Financial Authority warns banks and monetary establishments that the implementation of decentralized Blockchain networks could increase concealment risks, making a perfect atmosphere for the emergence of criminal activities and illicit transactions.
Most of the world’s leading banks and monetary establishments are trying to integrate the Blockchain technology into their existing systems. Its mining-based network and decentralized nature permits companies to store and transfer financial information instantly with low fees.
The mechanism of utilizing a shared network amongst each directors and users permits the settlement of cash in real time, permitting banks to method cross-border payments in additional cost-effective and secure manner.
However, the Hong Kong Financial Authority states that the anonymous and decentralized characteristics of the Blockchain technology could lead banks into conflicts with monetary rules and Know Your Customer policies. Banks and monetary establishments are troubled to find some way to implement the Blockchain technology, primarily thanks to varied financial rules. Banks aren’t allowable to integrate decentralized networks, as enforcement and authorities wouldn’t be ready to management the network and its settlements. Thus, the only technique of integrating the Blockchain technology is by making a permissioned ledger, or a manageable ledger, that’s centralized and grants an exact level of management to network directors.
While the concept of making a centralized Blockchain network appears simple in theory, mathematically and consistently, it’ll cause a huge security threat to the bank’s IT infrastructure. Because the Hong Kong financial Authority noted, regulators won’t permit the combination of decentralized networks. If they did allow it, banks would have already incontestable industrial use-cases of the Blockchain technology.
Executive Director of the Hong Kong central bank, Shu Pui Li said:
“Blockchain offers have sensible potential, but plenty of things ought to be addressed. The most painful issue is legal. Plenty of legal problems.”
With international budget for Blockchain development surpassing the $1 billion mark, Shu Pui Li thinks that banks and monetary establishments should be more cautious in approaching the Blockchain technology. There exists a very important reason behind the increasing investment within the Blockchain market which is that the desperate effort of banks to prove the relevancy of the Blockchain technology.