European Banking Authority (EBA) has released a detailed report outlining the risks and benefits of utilising the distributed ledger technology (DLT) in the financial sphere and mainly in accounting.
Why it is important
- Banks in general, are becoming increasingly interested in using blockchains in various areas of business. As Insider.Pro reported earlier, a group of several large European banks has recently completed a first cross-border blockchain-based transaction using the we.trade blockchain platform. 1. While last months it was also reported by Insider.Pro that a Spanish banking consortium Niuron will develop a new blockchain-based system aimed at verifying the digital identification of its customers. Also, Fast Track Listing (FTL) technology is being developed by a group of banks including Santander and BNP Paribas.
The document does acknowledge that financial and credit institutions are leading the trend for blockchain adoption and research. EBA does confirm that using blockchain does provide a solution for a range of issues including the cross-border transactions and user authorization.
“[DLT] may potentially enable institutions to automate the financial process of trade transactions and reduce the risk for both the importer and the exporter,” the document says.
However, EBA also highlights possible risks associated with blockchain usage. The greatest issue according to the document is the absence of a unified governance system that would also arbitrate the disputes, especially is the two parties in conflict are registered under different jurisdictions.