While it is most known for being the underlying technology behind cryptocurrencies, blockchain technology has so much more to offer to the world. In fact, blockchain technology has the potential to disrupt the global financial sector as we know it.
In an interview with AFP, Colin Ellis, the managing director for credit strategy at Moody’s, talked about the disruptive effects of the blockchain revolution on financial institutions like banks:
“Any disruptive shock—be it technology, economic or political—tends to result in winners and losers, and blockchain is no different. It could reduce the costs for banks but at the same time could foster more competition that would put downward pressure on fees.”
Information on a blockchain—an encrypted, public distribution ledger—cannot be manipulated. Thus, with blockchain technology, there exists the promise of a more secure and accurate transaction environment.
Aside from the increased security, blockchain allows for asset trading that is faster and cheaper compared to asset trading using traditional platforms. This poses a risk to banks that make a profit from fees charged to clients in exchange for trading services.
Although banks and other financial institutions could also take advantage of blockchain technology that would cut transaction costs, the technology is more likely to increase the competition among the institutions.
Also in an interview with AFP, cryptography expert Anish Mohammed said:
“There will be winners and losers, the losers will be those who do not make any changes.”
The race is on!
The biggest financial institutions in the world are already researching and experimenting with blockchain tech.
Ellis says that the tech is still relatively new and that it is “too soon” to gage the “final impact” blockchain tech would have on the global financial sector:
“But it could ultimately make banking cheaper and quicker for consumers.”