Credits: Nathan Dumlao

In this, the 3rd in my series of articles about the blockchain and banking, we continue to look at how these fields can interact each other.

Find my first 2 articles here:

  1. Blockchain and payments
  2. Blockchain and fundraising

In this article you'll read about security and transactions.


Security transactions usually takes between 1 to 3 days to settle because everyone has to be updated. Because there are so many different parties involved in a single transaction, and every transaction has to be manually validated.
This is the reason why each party — brokers, exchanges, security depositories, clearing houses, and banks — charges a fee to do that.

Blockchain technology wants to change logics behind financial markets by creating a decentralized dB of digital assets that are unique

With a distributed ledger it is possible to transfer the rights to an asset through cryptographic tokens, cutting out third parties (middlemen) and lowering asset exchange fees.

Through smart contracts, tokenized securities can work as programmable equity — paying out dividends or performing stock buybacks through a couple lines of code. Finally, putting real-world assets on the blockchain has the potential to usher in broader, global access to markets.

Blockchain companies like Polymath want to help migrate trillions of dollars worth of financial securities to the blockchain, enabling companies to take control of their equity issuance through programmable code.


It’s not just theory

This year, UniCredit announced that it has successfully completed its first blockchain technology transaction. The transaction was carried out on the we.trade platform, created by a consortium of eight banks that, in addition to Unicredit, includes Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and Banco Santander.

Credits: Stephen Phillips

While tokenized assets are a promising use case for the blockchain, the biggest hurdle is regulatory. The fact is that today it is still unclear if ownership on the blockchain is legally binding, while tokens remain a strange term that don’t currently have legal standing.

Regulatory and legislative guidance will be key to the success of these nascent projects.

Financial institution, blockchain technology and consumer need are slowly converging. Another space where that convergence has the potential to completely upend the way finance operates today is in lending and credit — a domain that’s no stranger to disruption.



Andrea
I'm an HX designer with a passion for the financial and crypto fields. I'm focused on innovative stuff and want to share what I learn. Feel free to reach me on andreapaci.me